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. Claims handling: on 6 March 2024, ASIC issued a letter to general insurers calling out their claims handling obligations in response to the severe weather events occurring in the recent months which has been declared by the Insurance Council of Australia as an "insurance catastrophe". ASIC underscores the significance of transparent, clear and timely communication, effective project management of third parties, prompt handling of complaints and vulnerabilities, and sufficient resourcing for claims handling and dispute resolution. Although ASIC acknowledges that general insurers have taken steps to improve their claims handling practices in response to severe weather events, given that the frequency and intensity of such weather events are on the rise, ASIC is expected to push for a greater focus on adherence by insurers to their obligations, better responses and outstanding claims from past incidents being resolved. Insurance claims handling is an enforcement priority for ASIC in 2024, and ASIC is closely monitoring…

2. Scams & websites: ASIC has touted the success of scam website takedown capabilities granted in July 2023 in its most recent enforcement and regulatory update. ASIC has indicated that as at 31 December 2023 it has used this capability to take down nearly 3,500 websites deemed to be operating investment scams. Additional highlights include an increase in civil and criminal litigations resulting in nearly $60 million of civil penalties imposed by the courts and 9 criminal convictions at a success rate of 80%. In his assessment of the work taken by ASIC in the preceding 12 months, ASIC Chain Joseph Longo states that “We are not deterred from taking on challenging enforcement action under new laws that have yet to be tested before the courts.” 

3. Finfluencers:  ASIC has obtained sequestration orders which had the effect of bankrupting Tyson Scholz, a popular social media “finfluencer” and self-proclaimed “ASX Wolf”. Mr Scholz was ordered to pay ASIC’s court expenses of $456,296.64 in connection with legal proceedings commenced by ASIC against Mr Scholz in December 2021. In these proceedings, the Federal Court found that Mr. Scholz contravened section 911A of the Corporations Act 2001 (Cth) by carrying on a financial service business without an Australian Financial Services License. Mr Scholz had used his Instagram account, which had over 116,000 followers, to promote fee-based seminars and online trading groups where he shared opinions on stock picking, both publicly and privately through direct messages with subscribers seeking his advice on specific stocks. The case brought by ASIC against Mr Scholz is evidence of ASIC following through with its announcement in 2021, when “finfluencers” began growing in popularity, to increase scrutiny of social media influencers recommending financial products and enforce penalties against those providing unlicensed financial advice. This will ideally ensure those using social media as a platform to provide finance-related education are equipped with necessary expertise and operating within the parameters of the regulatory framework. 

4. FAR guidance: the Minister's Rules for FAR have finally been issued (see the comparite from the 2022 version, here), and ASIC / APRA have released the final rules and further guidance to support implementation of the Financial Accountability Regime. Key takeaways are: 1) clarity for the prescribed responsibility relating to the AML/CTF function - it only applies if the accountable entity is a reporting entity under the AML/CTF Act (so General Insurers will not need to cover this function); 2) notification thresholds that identify an enhanced entity now align to the thresholds used to determine if the entity is a significant financial institution; 3) interestingly, the key functions of “financial services regulatory engagement” and “risk culture” are among those that have been removed from the list of regulators’ key functions for ADIs; and, 4) an accountable persons’ names and birth places do not need to be provided to ASIC / APRA for inclusion in the FAR Register.  Learn more on our dedicated website here, or in Thomson Reuters forthcoming practical law series on FAR which should be in market soon!

5. International perspective: the Hong Kong Monetary Authority has issued a great circular setting out the supervisory standards expected of authorised institutions in relation to their tokenised product-related activities. (The HKMA circular applies to tokenised products that are not regulated under the Securities and Futures Ordinance (Cap. 571) - for example currency-linked or commodity linked products.) Like the SFC, the HKMA generally takes the view that many tokenised products are simply traditional products with a tokenisation “wrapper” - this does not mean that there are not new risks, including technology, cyber safety, ownership, legal, regulatory, custody, systems connectivity and continuity risks.  An authorised institution needs to engage with the HKMA before engaging in tokenised product-related activities.  It is an excellent paper, and as the tokenisation of tangible products generates speed worldwide, HK's work in this regard is world leading!

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