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. ASIC senate inquiry: The Senate inquiry into ASIC has found it “comprehensively failed to fulfil its regulatory remit” because its scope was too broad and complex. The commission’s investigations and decisions are “opaque”, and the regulator responded to criticism by directing “even more resources to managing its reputation”. The report makes 11 recommendations including  that (1) ASIC be broken up into two bodies - one to regulate companies, and another to regulate financial services – and; (2) major governance changes are made to ASIC.  It also recommends following the US approach to whistleblowers, by incentivising them for blowing the whistle (e.g. SEC whistleblowers are entitled to between 10-30% of any successful enforcement proceeds). There is certainly no guarantee that the major structural reforms it advocates will get government sign off- the Labour senators on the Committee penned a dissenting statement which described the final report as a “missed opportunity” that reduced “evidence and engagement to little more than a headline grab”. It may also increase the regulatory burden on regulated entities, as our Practice Head Avryl Lattin commented in Insurance News here. The final report, and associated materials, are accessible here. 

2. ASIC approves the enhanced Banking Code of Practice: ASIC has approved the enhanced Banking Code of Practice, with enhancements including: (1) expanding the definition of a small business from $3 million in aggregate borrowings to $5 million meaning another 10,000 businesses will be eligible, (2) improved inclusivity and accessibility for customers, including via interpreter services, (3) new provisions for deceased estates, (4) broadening the definition of financial difficulty, and (5) enhanced protections for loan guarantors.

3. Unfair contracts terms: The Federal Court found that a term in PayPal's standard contracts was unfair because its effect was to allow PayPal to retain fees that it had incorrectly charged if the small business failed to notify PayPal of the error within 60 days of the fee appearing on its account statement. PayPal agreed that the term was unfair and consented to the declarations, having voluntarily removed the term from its contracts on 8 November 2023. The unfair term was declared void from the start of the contracts and PayPal is restrained from applying, relying on, or enforcing the term in its contracts with small businesses. 

4. Equities markets: In a Statement issued by Joe Longo, the ASIC Chair has affirmed that supervising Australia's equities markets, and ensuring that they are ‘clean’ e.g. ‘fair, orderly and transparent' is one of ASIC’s most important functions.  Common actions that make for a problematic market are information leaking before major announcements / insider trading, etc. Similar to the tools it is increasingly deploying to identifying misleading and deceptive conduct across website, ASIC has in the last year been using a system which '…hunts for and detects suspected market misconduct, profitable and suspicious trading patterns, and identifies connections between traders and potential sources of inside information.' It combines and uses advanced algorithms to analyse data from various sources including ASIC’s data, ASX, ATO and commercial vendors. This is a great development for regulatory efficiency, which can be expected more broadly across the organisation.  ASIC currently has 6 insider trading matters before the courts and multiple investigations on foot.  

International perspective:  it is a big year for Western democracies with major elections, and the potential policies Governments bring to the regulatory settings for digital assets.  Over in UK, Sir Starmer's major victory for Labour is coupled with statements from the Labour Party saying that it will support tokenisation and a central bank digital currency.  Exciting times ahead, and even more so with the US election later this year…