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. Non financial misconduct (FAR / SMCR): the FCA is about to specifically target banks and brokers in its crackdown on non financial misconduct. In January, insurance firms and intermediaries were asked to provide: how many and what type of incidents have been recorded, and whether these came from whistleblowing or other means; whether complaints led to a warning, dismissal or no action; and whether non-disclosure agreements or employment tribunals followed. Now UK banks and brokers will be asked how how they deal with issues such as sexual harassment, bullying and discrimination. This is directly relevant to FAR implementations, as the UK SMCR is based on the same conduct obligations e.g. “integrity”. ASIC and APRA will be watching closely. Make sure to include these scenarios in your testing phases (together with consequence management, and ransom attacks - we usually do 4 - 5 scenario tests, and these two are always in there as key friction points).
2. Crypto / MIS: staking crypto assets i.e. when you lock up crypto assets e.g. BTC or ETH, etc for a set period of time to help support the operation of a blockchain, which can result in rewards in the form of tokens is a focal point in financial services regulation - our team is daily advising on whether particular staking activities constitute a 'managed investment scheme' i.e. pooling of assets, in return for rewards (which requires an AFSL) or otherwise. Plus all the associated financial products e.g. derivatives, non-cash payment facilities, market making, etc. Block Earner - despite getting legal advice on the structure / immediately pulling the product when ASIC raised queries - has been found to have engaged in unlicensed financial services activities for its ‘earn’ product as it was found to be a managed investment scheme. There are potential civil, and criminal consequences for getting this area wrong, so this is a good reminder to the rapidly financialising digital assets market to do serious DD on product launches / staking activities!
3. FAR: the Ministers' Rules specifying roles caught by FAR have not been finalised yet - so ASIC / APRA have pushed back the time for submitting applications for registration of new accountable persons and for complying with core or enhanced notification obligations. ASIC and APRA expect entities to submit their registration applications and to make relevant notifications to the regulators as promptly as possible, and no later than 30 June 2024. This does not mean that the regime, and the conduct obligations which come with it, does not commence on 15 March! We are engaged with policymakers in relation to additional time for insurers and RSEs - noting they are building FAR from scratch, unlike the banks who are building on BEAR - get in touch for all the latest shifts in this space / any artefacts on AP statement, reasonable steps reviews, consequence management frameworks, timelines or anything else we can assist with. FAR is our 30+ FS regulatory teams' speciality, having partners who've working on accountability regimes in the UK, HK and Australia for 10+ years.
4. APRA injunction: There are a lot of words which are prohibited from use in financial services without a licence e.g. insurance, term deposit, and bank. APRA has been granted an injunction to prevent an individual from carrying on unauthorised banking business and using the word “bank” without a licence. Robert Bruce Gray has been injuncted from from operating and marketing businesses in Australia that he described as banks, despite not being authorised to carry on a banking business. Mr Gray’s purported businesses include Commercial Development Bank and Creditnet Bank Internationale. A rare foray by APRA to the courts, and a good result.
5. International perspective: billions have flowed into Bitcoin, after the US ETF approvals in January 2024. It has pushed the price of Bitcoin to previous record highs, and now the excitement is building on the news that the first Ethereum US Spot ETF may be granted in May 2024 and is almost certain for this year. It is a great development for the industry, as it gives exposure to the asset class, together with the consumer protections and practicality i.e. no need to personally managed private keys.
Learn more about our global regulatory and investigations team here.
“The industry is very much asking us to lean in for some regulatory intervention in this space [sexual harassment and bullying] and in the two areas that you see set out in the consultation" (Sarah Pritchard, Markets and Executive Director, International)
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