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. ALRC: The ALRC's Corporations and Financial Services Legislation Inquiry - the Final Report of the Inquiry was tabled in Parliament last week; it is compulsory reading for anyone practising financial services law! The ALRC has found that current legislation is ‘unnecessarily complex’, regulated entities incur ‘unnecessary’ costs in compliance, consumers find it ‘difficult’ to identify their rights, lawyers ‘struggle’ advise clients with sufficient certainty and judges confront 'labyrinthine' provisions of the law. Heady stuff and, as financial regulatory lawyers, we wholeheartedly agree! It has made 58 recommendations to simplify the law, including a wholly redesigned legislative framework. For example, recommendation 31 provides that "Corporations and financial services legislation should be amended to enact a single, simplified definition of each of the following terms: a. ‘financial product’; and b. ‘financial service’". Given how critical / complicated those terms are in practice, that would fundamentally impact every financial services' regulatory lawyers' practice in the country.  Clyde & Co were deeply honoured to be an ‘expert reader’ for the report, and think that it will be critical for the future for Australia.

2. FAR / UK:  the UK Financial Conduct Authority (FCA) is undertaking a proactive review of banks, general insurers and brokers around sexual misconduct, and bullying & harassment. It is directly relevant to the Financial Accountability Regime (FAR) in Australia. Putting it within the local context of FAR: towards the end of 2023, the UK FCA, alongside the UK Prudential Regulation Authority (PRA), published consultation papers which proposed a series of regulations regarding non-financial misconduct (NFM); the FCA has put forward that bullying and similar misconduct in the workplace are relevant to Fit & Proper assessments. Serious misconduct in an individual's personal life, such as sexual or racially motivated offences, will also be considered a relevant factor in F&P assessments. Individuals engaging in serious NFM, whether inside or outside the workplace, can be deemed unfit and improper, posing a risk to public confidence. The introductions of these NFM considerations are significant, not only because they explicitly cover serious instances of bullying, harassment, and similar behaviour, but it makes clear that behaviour in an individual's private or personal life will now fall under the "fit and proper" test for senior management; and, it is an escalation of an existing approach. Organisations should focus on the vetting of incoming APs, the consequence management frameworks and the capability of their people in operating them.  Who (individual) holds accountability for commencing an investigation? Based on what subjective approach to integrity? How will the remuneration consequence be dealt with / reported to ASIC?  

3. Misleading & deceptive conduct: Members Equity Bank Limited has been ordered by the Federal Court to pay a penalty of $820,000 after pleading guilty to criminal charges (12DB(1)(g) and 12GB(1) of the Australian Securities and Investments Commission Act 2001) of making false and misleading representations, and failing to provide required written notices regarding home loans. In essence, ME Bank sent nearly 600 letters specifying minimum repayment amounts to be paid after the expiry of either a fixed-rate or interest-only period, and those amounts were less than the amount required to be repaid. It also failed to send letter informing customers that the interest rate and minimum repayment amount was changing after the expiry of an interest-only or fixed-rate period. It is a timely reminder of the criticality of accurate communications regarding financial and credit products. 

4. Financial advisers: 4,036 (26%) financial advisers who provide personal advice to retail clients on relevant products were not registered with ASIC on 1 January 2024. ASIC has extended the deadline by two weeks, noting the provision of personal advice by unregistered advisers is prohibited and carries significant penalties. The requirement for financial advisers to be registered was introduced by the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021, and is separate to the pre-existing requirement for an AFS licensee to appoint a financial adviser to Financial Advisers Register upon authorisation.

5. Global perspective: Hong Kong's Securities and Futures Commission stated in December 2023 it was prepared to authorise retail access to spot virtual asset ETFs. Whether it will approve a spot ETF first, or Australia's ASIC will, which is currently considering at least one application for an ETF which is expected to be approved soon, is an open bet. Either way, APAC investors will soon have access to spot ETFs in their own markets, and with corresponding consumer protections.