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. Director identification numbers: ASIC has commenced its first prosecution against a director for failing to comply with the obligation to have a director identification number. The director (who has not been named) was formally charged on 19 March in the Downing Centre Local Court with one count of contravening s 1272C(1) of the Corporations Act 2001. The court granted an interim non-publication order (NPO) which is why the identification of the defendant has been prohibited. The charges have been listed for a further mention before the Downing Centre Local Court on 16 April 2024 and the NPO has been extended to this date as well. ASIC reports that the defendant in this matter faces a maximum penalty of $13,320. All directors are required by law to verify their identity with Australian Business Registry Services before receiving a director ID and must receive their director ID before being appointed. 

2. Insurance products / consumers: The Australian Government announced in the 2022-23 budget that it intended to improve consumer understanding of insurance products as part of a package of reforms designed to reduce the cost of insurance in communities at risk of natural disasters, enhance mitigation measures, and promote better outcomes for consumers. The Treasury has been tasked with exploring possible natural hazard terms to standardise for insurance contracts and to review the standard cover regime. Currently the only natural hazard definition that is standardised is ‘flood.’ This consultation paper seeks feedback from interested stakeholders on potential natural hazard terms for standardisation, as well as possible reform to the standard cover regime. Submissions close on 4 April 2024. The consultation paper is available here. 

3. APRA to expand stress testing regime:  APRA has announced an intention to expand its stress testing regime and introduce an additional financial system stress test to sharpen APRA’s response to systemic risks across the financial system, including major tech and telecommunications outages, a collapse in the commercial property market or climate change impacts. The additional stress testing will complement APRA’s current ADI stress testing program. It will impact banking, superannuation and insurance sectors, and complements the implementation of CPS 230 in our view. Get started on those implementations now if you have not already! 

4. Insurance & natural disasters:  APRA Executive Director of Insurance, Sean Carmody, has used his address at the Future of Insurance event to call out what APRA sees as the growing gap that exists in relation to the ability of consumers to access insurance.  He noted that collective responses to risk mitigation through both government and industry will be important in ensuring that markets remain accessible in a market beginning to feel the impacts of increasing natural disasters. Mr. Carmody highlighted the need for industry to drive a collective response through increased innovation and transparency around products being offered in order to address growing concerns. In our view, all of this fits within the context of Design & Distributions obligations, and ultimately personal responsibilities under FAR.

International perspective: one of the more fascinating aspects of the US SEC, is that is has 5 Commissioners (essentially a board), who are appointed by the President and confirmed by the Senate. Commissioner Hester Peirce said to a crypto conference last week that the SEC is in “enforcement-only mode”, and “If we had clearer rules you could focus on building” - it reflects the deep division in regulation of crypto in the US, including within the premier regulator itself. 

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