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. UCT “Tell us if anything changes” case to continue: ASIC has announced that it is appealing the landmark insurance UCT decision in which the Federal Court found in favour of the insurer Auto & General in upholding that a term in its home and contents policy was not unfair under the ASIC Act. The term in question required the insured to notify the insurer if “anything changes” during the period of cover and provided a non-exhaustive list of examples, such as the insured starting to earn an income at the address or any construction work starting or finishing. Failure to comply with this notification obligation allowed the insurer to cancel the contract, not offer renewal and/or refuse to pay or reduce a claim. Jackman J concluded that the criteria for unfairness under section 12BG(1)(a) and (b) of the ASIC Act were not satisfied (i.e., the term did not create a significant imbalance in the parties’ rights and was reasonably necessary in order to protect the legitimate interests of the advantaged party) and therefore it could not be unfair notwithstanding that detriment element of limb (c) was met. In announcing its decision to appeal the decision, ASIC has stated that it remains of the view that the term is unclear, misleading and unfairly expands Auto & General’s discretion under the Insurance Contracts Act. In doing so, ASIC is demonstrating its ongoing commitment to consumer protection and pursuing enforcement action.
2. ASIC obtains Federal Court orders appointing receivers over digital currency assets of blockchain mining companies: ASIC has obtained Federal Court orders appointing receivers over the digital currency assets of NGS Crypto Pty Ltd, NGS Digital Pty Ltd and NGS Group Ltd and their sole directors. ASIC became concerned that the digital assets of investors, which are invested in the blockchain mining products offered by the NGS companies, were at risk of dissipation. It is estimated that approximately USD$41 million has been invested through the NGS companies, with Australian investors being targeted to invest in blockchain mining packages with fixed-rate returns with monies transferred from regulated super funds into self managed (unregulated) super funds that were converted into cryptocurrency. ASIC alleges that the NGS companies contravened s 911A of the Corporations Act 2001 (Cth) by providing financial services without an Australian financial services licence and has yet again made its stance on crypto assets clear, stating that “these proceedings should…send a message to the crypto industry that products will continue to be scrutinised by ASIC to ensure they comply with regulatory obligations in order to protect consumers.” Investigations are ongoing but it will be interesting to see how yet another action from ASIC in the crypto space will impact the types of products available in the market.
3. Latest data on life insurance claims and disputes: APRA has released its Life Insurance Claims and Disputes Statistics publication, covering the 12-month period between 1 January 2023 to 31 December 2023. This publication presents the key industry and entity-level claims and disputes outcomes for 17 Australian life insurers writing direct business (excluding reinsurers). ASIC has also updated its MoneySmart Life insurance claims comparison tool, which compares insurers across cover types and distribution channels on the percentage of claims accepted, the length of time taken to pay claims, the number of disputes and the policy cancellation rates in a consumer-friendly format, to reflect the latest data. Of particular note is the sharp increase in dispute lodgement ratios for individual advised products and certain products due to recent regulatory focus. 
4. Proposed updates to ASIC regulatory guidance for external administrators and controllers: ASIC has released a consultation paper on proposed updates to its regulatory guidance for external administrators and controllers when reporting and lodging statutory reports about alleged misconduct. The proposed updates will affect Regulatory Guide 16 External administrators and controllers: Reporting of possible offences and misconduct and clarifies ASIC’s expectations of external administrators and controllers’ compliance with reporting obligations along with ASIC’s approach to the information recieved. These proposed updates illustrate ASIC desire to reduce unnecessary effort and expense with regard to reporting requirements.  ASIC considers reporting obligations to be an important ‘front line’ information source for enforcement action. ASIC is inviting feedback on its proposals by 6 June 2024.  
5. International perspective: the FCA in the UK has put motor finance firms on notice that adequate financial resources must be maintained at all times to manage the impact of the ongoing review into motor finance discretionary commission arrangements (DCAs) and sales involving DCAs. DCAs, which essentially incentivised motor dealers to charge higher interest rates under customers’ motor finance agreement by linking the interest to the amount of commission received by the dealer from the lender, have been banned since 2021. However, the FCA has confirmed that it expects finance firms to be ready to meet additional operational costs from increased complaints, and additional costs of resolving those complaints, that are expected to flow from the outcome of the review. Barclays has commenced judicial review proceedings of the Financial Ombudsman Service’s decision to uphold a complaint relating to DCA and it will be interesting to see how this may impact the conclusions of the review.  The FCA has promised to announce next steps by September this year.  

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