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 key developments from the past week for you to consider. 

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1. BTC ETFs: the US SEC has approved 12 ETFs investing in BTC.  An exchange-traded fund or ETF is a basket of securities that tracks an underlying index, in this case Bitcoin.  (Ether or ETH is coming later in the year.) It essentially gives the market a way to get exposure to the asset class without having to manage private keys, and greater consumer protections.  It is a watershed moment, and one that has brokers around the world (incl. Australia) scrabbling to give their clients access to these ETFs.  For the industry, we think that:  global policymakers / regulators have been moving to regulate digital assists, which drives mainstream adoption; institutional investment will drive mainstream adoption even more - $US 5 billion flowed into the ETFs on the first day when they started trading; and, we expect to see other regulatory approvals follow globally, and financial innovation, offering businesses and investors with increasingly attractive opportunities/greater protections. You can learn more about it in our ABC Radio Interview here. 

2. Climate related financial disclosure: Treasury has released legislation which proposes to amend the Corporations Act 2001 (Cth) and the Australian Securities and Investment Commission Act 2001 (Cth) to introduce mandatory requirements for large businesses / financial institutions to disclose their climate-related risks and opportunities. Climate disclosures will be subject to similar assurance requirements to those currently in the Corporations Act for financial reports and will require entities to obtain an assurance report from their financial auditor. The new requirements build on the existing financial reporting framework through inclusion of a new ‘sustainability report’ , which will consist of: the climate statement for the year; notes to the climate statement; any statements prescribed by the regulations for the year; and, the directors’ declaration about the compliance of the statements with key sustainability standards.  Small and medium entities, below the relevant size thresholds generally are not required to make climate-related financial disclosures.  Expect to see a lot of NFP and media attention on these statements, based on the UK experience for climate reporting, and the experience Australian companies have faced under the Modern Slavery regime.

3. Directors duties penalties: The Federal Court (see here) has ordered four current and former directors of Endeavour Securities (Australia) Ltd (in liq) and Linchpin Capital Group Ltd (in liq) to pay $390,000 in penalties.  The directors breached their duties as officers of a responsible entity of a registered managed investment scheme and did not act in the best interests of members.  In essence, they raised $17M in capital, though the disclosure statements did not reflect the true position the responsible entity; the compliance plan was not complied with; and, member approval was not obtained for related party loans. ASIC plans to focus on directors' duties in 2024, as one of its ‘enduring priorities’ (see here); together with implementation of the FAR this year (for a 2025 start for GIs, LIs and RSEs), which expands the duties on directors, it will be a busy year for boards ahead. 

4. AFCA complaints: AFCA has increased thresholds for hearing complaints - see here. It can now consider disputes where the amount being claimed by a consumer does not exceed $1,263,000 or where the credit facility does not exceed $6,317,000 for small businesses and primary producers. These changes came into effect on 1 January 2024 and apply to all complaints received by AFCA from that date.

5. AML / CTF compliance & focus areas: AUSTRAC has reminded entities that it is time for focus on their 2023 compliance report from 1 January to 31 March 2024.  The reports cover key aspects of their AML / CTF obligations, and assists AUSTRAC in understanding the compliance adherence of reporting entities.  It is a particular focus for DCEs, payment platforms and non-bank lenders, as they are within AUSTRAC's strategic focus areas this year.  You can read about AUSTRAC's increased regulatory focus on these areas in its regulatory priorities list here (page 6).  We are still waiting for the next round of consultation on the updates to the AML/CTF framework which was scheduled for September last year.

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