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. American Express breach of Design & Distribution Laws: The Federal Court has ordered American Express Australia Limited to pay $8 million in penalties for breaching the design and distribution obligations in relation to two co-branded credit cards (with David Jones). It found the global credit card company breached the design and distribution obligations as a credit card issuer from 25 May 2022 to 5 July 2022, because it: a) ought to have known high cancelled application rates reasonably suggested that the target market determinations (TMDs) for the cards were no longer appropriate; and b) failed to stop issuing the credit cards when it had not reviewed the TMDs. Justice Jackman said: 'In addition to an obligation to identify an appropriate target market within a TMD, inherent in this consumer-centric approach is a requirement for financial product issuers and distributors to actively review events and circumstances that may suggest that an existing TMD is no longer appropriate.’
2. ASIC acknowledges royal assent of the DBFO Act: ASIC has acknowledged royal assent of the Treasury Laws Amendments (Delivering Better Financial Outcomes and Other Measures) Act 2024 (DBFO Act). Stemming from the Quality of Advice Review, the legislative reforms in the DBFO Act include streamlining ongoing fee renewal and consent requirements, for example: a) removing the requirement to provide a fee disclosure statement and providing more flexibility in how Financial Services Guide (FSG) requirements can be met; b) simplifying and clarifying the provisions governing conflicted remuneration; and c) introducing new standardised consent requirements for life insurance, general insurance and consumer credit insurance commissions. ASIC has registered ASIC Corporations (Amendment) Instrument 2024/554 which makes consequential amendments to ASIC instruments to reflect the changes to FSG requirements, and will update regulatory guidance impacted by the DBFO Act over the coming months.
3. Former BitConnect promoter John Bigatton convicted for providing unlicensed financial advice: Australian promoter of BitConnect, John Bigatton, has been convicted by the Sydney District Court for providing unlicensed financial advice contrary to section 911B(1) of the Corporations Act 2001 (Cth). He was released on a good behaviour bond for three years. BitConnect was a financial services business and online crypto platform which required investors to acquire BitConnect Coin (a crypto token) in order to participate in its investment opportunities. Mr Bigatton provided unlicensed and unauthorised financial advice when he promoted BitConnect in Australia in seminars and on social media between August 2017 and January 2018. For example, in two of the seminars, Mr Bigatton told attendees that BitConnect Coins would increase in value to at least USD$1,000, and said words to the effect that ‘BitConnect is better than any term deposit out there.’ The Court said that ‘people who get involved in the promotion of financial products as part of a business for profit...need to be scrupulous in finding out for themselves what the law is and then to abide by that law. They need to understand that breach of these types of laws is a criminal offence and upon conviction they can expect to be met with stern penalties'.
4. Second round of public consultation on proposed reforms to the AML/CTF regime has drawn to a close: The latest round of consultation on proposed reforms to the anti-money laundering and counter-terrorism financing (AML/CTF) regime sought feedback on proposed legislative changes affecting current reporting entities as well as certain entities providing higher-risk services (such as lawyers, accountants, trust and company service providers, real estate agents and dealers in precious metals and stones). The reforms consist of three main components, being: (a) addressing vulnerabilities in sectors providing certain high-risk sectors; (b) modernising digital currency and payments technology-related regulation; and (c) simplifying, clarifying and modernising the AML/CTF regime. All feedback is currently being reviewed by the Attorney-General’s Department (AGD) to inform the development of the draft legislation.
International focus: the US Securities and Exchange Commission last week announced an award of more than $37 million to a whistle-blower who provided information not previously known to the SEC and which significantly contributed to a successful enforcement action. The potential application of bounties is being positively considered by the Government in Australia after the Senate Inquiry on ASIC recommended incentivising whistle-blowers.
‘Providing unlicensed financial advice denies Australian investors access to key protections and undermines trust and confidence in Australia’s financial services industry. ASIC is committed to taking action against the unlawful promotion of high-risk digital assets to protect Australian investors’ (ASIC Deputy Chair Sarah Court )
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