Australia's current financial services regulatory & 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. Treasury Consultation Paper: Finally! Our friends at Treasury have released the digital assets consultation paper on licensing / custodianship of digital assets.  They did not disappoint, and it is important to call out when policymakers have done a great job and really listened to industry / assessed the global landscape and calibrated their recommendations.  It is excellent work to build on. There will be a lot of commentary in response, which Clyde & Co and its clients will continue to be a part of - our last consultation paper on Sen. Bragg's legislation is here, but essentially: crypto exchanges holding more than $5 million in total or more than $1,500 for any individual will need an AFSL (apply now, as they take time, is my free advice); platform providers will be required to have NTA at the greater of $5 million or 0.5% of the value of the assets held by the facility (which, while technical, is an amazing calibration - the NTA requirements for traditional firms are much heavier); non-financial products , which are normally outside the scope of financial services laws, will be subject to proportionate standards and regulation; digital asset facilities will be required to meet minimum standards that largely apply to financial products and services that hold assets e.g. the requirement to hold financial products on trust. Some really fascinating other aspects e.g. capturing foreign companies - do we need to, and whether local companies disclosing their liquidity sources is one question we have - but please pass all these thoughts through to us if you want to contribute anonymously, or directly to Treasury of course.  The Aussies are finally catching up on the global stage! On the same day, ASIC Chair Long has spoken on the need for trust in crypto, and the role of strong enforcement. There is a bit in there I don't necessarily agree with, including the underlying philosophy (reasonable minds may differ of course), though the message is that “…there must be regulation of crypto-assets and their service providers to better protect investors. Regulation must include enforcement.  ” In essence, as crypto is brought within the AFSL framework, expect ASIC to be ready to take actions where the general obligations e.g. providing services “efficiently, honestly, and fairly” are not met, and to take action against unlicensed conduct.  Start now with the AFS licensing process!

2. Breach reporting; some relief has been granted from the breach reporting requirement for misleading and deceptive conduct incidents, effective 20 October 2023.  Here is the Instrument and Explanatory Statement, which should be welcome relief to many of our clients - it is a welcome development, as 12DA of the ASIC Act 2001 (Cth) is a strict liability provisions which generated countless breach reports for very minor matters e.g. incorrect premiums, etc.  Breach reporting policies & procedures can be updated now! 

3. Pre-contractual disclosure:  ASIC Credit (Electronic Precontractual Disclosure) Instrument 2020/835 allows credit licensees and representatives to give pre-contractual disclosure to consumers in the same electronic manner that applies to other credit disclosure documents. A welcome development, slowly but surely, we are modernising our regulatory architecture to permit electronic executions, disclosure and verification.  The instrument only applies for a period of 12 months until 1 October 2024, giving time for law reform.  Don’t forget though, if something doesn’t quite fit from a regulatory perspective for your business, and you meet all the requirements / get appropriate advice, you can always apply for relief from ASIC.  A number of major loyalty schemes do this to deal with the non-cash payment facility requirement to hold an AFSL, for example. You can see the requirements for relief here.

4. Insurance focus areas: Deputy Chair Karen Chester has delivered a speech calling on insurers to "get the basics right" in their areas for insurance pricing promises e.g. binding multiple and legacy systems, product design and distribution (this line I thought was very good: “And your consumer-first mindset visible and preserved through time. As you test the assumptions and outcomes in your product design and distribution. Not a ‘set and forget’ game.”), and claims handling. For the last, ASIC identified insurers needed better: better communications to customers about decisions, delays, and complications; oversight of third parties; recognition and handling of complaints and expressions of dissatisfaction; identification and treatment of vulnerable consumers, and resourcing of claims handling and dispute resolution functions.  Ms Chester also called out boards, noting that they take whole of business accountability for getting the basics right.  Eerily reminiscent of FAR language, which will come into effect for insurers on 17 March 2025 (for all the information you need to know there, see our dedicated FAR website here). 

5. Superannuation transparency: the prudential regulator is consulting on proposals that would significantly increase visibility of how superannuation members’ money is spent and invested. It has invited RSEs to provide feedback on its plans to publish total fund expenditure and expanded asset allocation data by mid-2024.  In essence, the following: total expenses for the industry; total expenses at individual fund level by category; total expenses with the name of the service provider where the provider is a promoter; and, additional aggregated asset allocation data for fund investments in property and infrastructure, alternative strategy funds, listed equity and private equity. 

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