Australia's financial services regulatory and compliance landscape is changing rapidly - Clyde & Co's weekly Regulatory Roundup will ensure you are up to date with the most important changes. In each edition, we will set out five key developments from the past week for you to consider.
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1. FAR: The Financial Accountability Regime Bill (2023) has passed Parliament, and now received Royal Assent. It will commence on 15 March 2024 for Banks, and 17 March 2025 for all other entities e.g. general insurers. An average implementation timeframe for a small retail insurer is 6 – 9 months. Impacted entities need to get started on the implementation programs now; the first step is a briefing to ExCo and Board. Our Corporate Regulatory team launched our dedicated FAR webpage on the Clyde & Co website here, which includes a helpful 'Six steps to FAR implementation' here. Take a quick look, and reach out to: FARGroupAustralia@clydeco.com if you'd like to speak to any of our specialists.
2. Unfair contract terms: ASIC has sued PayPal Australia (the Concise Statement is here) alleging that its standard form contracts with small business customers contain an unfair contract term. The term gives business account holders 60 days to notify PayPal of any errors or discrepancies in fees, or else accept those fees. The conduct regulator alleges that the effect of the term is to allow PayPal to retain fees it has overcharged or wrongly charged. It also alleges, under s s12BG of ASIC Act 2001 (Cth), that the term: causes a significant imbalance in the parties’ rights and obligations under the contract; is not reasonably necessary to protect PayPal’s legitimate interests; and, would cause detriment to PayPal's business account holders if the term were relied on. With ASIC placing "Acting against misconduct that impacts small businesses" as a strategic priority in its latest Corporate Plan (page 14), and specifically unfair contract terms, businesses captured under the expanded UCT regime should review their stand form business contracts now.
3. Insolvent trading: ASIC has released Consultation Paper 372 Guidance on insolvent trading safe harbour provisions: Update to RG 217 seeking feedback on proposed updates to Duty to prevent insolvent trading: Guide for directors (RG 217). ASIC is considering providing additional guidance, including on when: a holding company may be liable for debts incurred by a subsidiary when the subsidiary has continued to trade while insolvent; the operation of the safe harbour provisions, and the factors ASIC will consider when assessing whether safe harbour protection is available; and, more generally, the key principles directors they should consider in carrying out their duty to prevent insolvent trading (which can result in personal liability).
4. Credit counterparties: Reporting Standard ARS 180 Capital Adequacy: Counterparty Credit Risk is being updated by APRA. APRA is consulting affected ADIs on proposed changes to Reporting Standard ARS 180.0 Counterparty Credit Risk. In essence, the changes are about reducing the burden on non-SFI banks, including the reporting relating to counterparty credit risk exposures. There are a wide ranges of banks in Australia, and so the regulatory burden on smaller ones can be burdensome, particularly after the Hayne Royal Commission changes stemming from 2019.
5. Electronic instruments: the Treasury Laws Amendment (Modernising Business Communications and Other Measures) Bill 2023 has received Royal Assent. It modernises various items of financial services legislative architecture, including the Corporations Act 2001 (Cth) to enable all documents under that act to be signed electronically and for certain documents to be sent in either hard copy or electronic form; and, provide that companies are not required to send documents to a member where contact details are known to be incorrect. It also amends the various financial regulators acts to enable certain regulatory bodies to hold virtual hearings and examinations.
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ASIC has commenced this action to protect the interests of small businesses. We allege this term is unfair because it allows PayPal to escape the consequences of its own errors in overcharging small businesses, and places additional burdens on small businesses to detect and correct charging errors (ASIC Deputy Chair Sarah Court)
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