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. UCT reform: from 9 November 2023, reforms will make ‘unfair contract terms’ illegal, attracting sizable penalties under the Competition and Consumer Act 2010 (Cth) and the ASIC Act 2001 (Cth), with each unfair term forming a separate contravention. If there is a contravention of the new UCT regime, that aggregated ultimate fine number could be large indeed! Expect this to be a large focus of ASIC, together with the actions it is taking under the design & distribution regime, and read Clyde & Co's excellent summary of the new regime here.
2. Crypto taxation: Australia has announced an intention to undertake collective engagement with a large number of other countries to implement the Crypto-Asset Reporting Framework, or “CARF”. CARF is a new international standard on automatic exchange of information between tax authorities developed by the OECD. It is designed to improve tax authorities' ability to ensure tax compliance and clamp down on tax evasion. The more regulation on digital assets, the more legitimacy - you can read the Treasury's statement here, which is a good thing in my view.
3. Investment scams: ASIC has released a webpage which consumers can use this list to help inform themselves as to whether an entity they are considering investing in could be fraudulent, a scam or unlicensed. It is brilliant! With 1,333 results already, which will help consumers in making informed choices, I highly recommend taking a look at the website here.
4. FATF AML / CTF: the Financial Action Task Force has published two recent updates relating to international ML/TF risks, which updates jurisdictions which may pose a risk to the international financial system. You can see them here: 1) High-Risk Jurisdictions subject to a Call for Action – October 2023; 2) Jurisdictions under Increased Monitoring – October 2023. Time to revisit those AML / CTF programs, unless they adopt the FATF lists by cross-referencing. Also, Australia is likely to continue to move forward with its own reforms to avoid being put on the grey list itself in the next couple of years.
5. Retail OTC: ASIC has overseen more than $17.4 million in combined compensation payments to over 2,000 retail clients affected by breaches of financial services laws by 8 retail OTC derivative issuers. In essence, CFDs are an arrangement made in financial derivatives trading where the differences in the settlement between the open and closing trade prices are cash-settled. There is no delivery of physical goods or securities with CFDs, and ASIC (and most global regulators) are not fans of them in a retail setting / have strict leverage ratios. The 8 derivative issuers essentially breached the leverage ratio limits permitted by the ASIC Corporations (Product Intervention Order – Contracts for Difference) Instrument 2020/986 e.g. 30: 1 for major currency pairs. It follows ASIC's research in October 2020, that most retail consumers lose money on CFDs which you can read here.
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‘OTC derivatives are complex, high-risk financial products. It is important that retail clients get the protections they are entitled to under the law when dealing with these risky products. These protections include the CFD product intervention order, design and distribution obligations, and access to external dispute resolution through the Australian Financial Complaints Authority.’ (Deputy Chair Sarah Court)