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. CSLR: ASIC has cancelled the Australian financial services and credit licences of Ultiqa Lifestyle Promotions Limited after the Compensation Scheme of Last Resort paid $19,429.60 in compensation, following Ultiqa's failure to comply with an Australian Financial Complaints Authority determination. This decision, made on 16 October 2024, follows ASIC's previous enforcement actions against Ultiqa, including proceedings in 2021 for unsuitable timeshare investment advice. The CSLR, operational since April 2024, ensures consumer compensation up to $150,000 when financial firms fail to meet AFCA determinations. ASIC is obligated to revoke licences when the CSLR compensates eligible consumers.

2. ASIC Annual Report: ASIC’s 2023-24 annual report highlights significant progress in its transformation program, aimed at consumer protection, cost reduction for businesses, and strengthened regulatory capabilities. Key achievements include ASIC’s first greenwashing penalty, the first stop order on a life insurance product, and its first infringement notice to the ASX. Investigations rose by 25%, with a similar increase in civil proceedings. ASIC also tackled over 7,300 investment scams, and its Moneysmart website supported over 11 million Australians. ASIC Chair Joe Longo emphasised that while progress is evident, continuous improvement is needed to adapt to emerging challenges and threats.

3. Super Fund Expenditure: APRA is intensifying its supervision of fund-level expenditure among RSE Licensees to ensure spending aligns with the best financial interests of superannuation members. Noting deficiencies and questionable spending practices, APRA plans to closely scrutinise discretionary expenses, governance, and decision-making processes over the next year. Initial efforts will focus on expenditure categories like travel, entertainment, and payee types where benefits to members are unclear. APRA will require RSE Licensees to justify spending decisions and may enforce corrective measures. To boost transparency, APRA will publish fund-level expenditure data annually, starting with 2022-23 data on 30 October.

4. Super Operational Resilience: APRA has announced updates to its prudential framework to strengthen financial resilience in superannuation. Following consultations since 2021, changes to the Operational Risk Financial Requirement (ORFR) will allow super funds to use reserves more flexibly to manage operational risks. APRA maintains a 0.25% of funds under management (FUM) benchmark for the ORFR, but larger funds can adopt lower targets of 0.20% or 0.175% based on scale. The finalised standards, SPS 114 and SPG 114, will commence in July 2025, aiming to reduce regulatory burdens while promoting robust risk management practices across the industry.

International developments:  The FCA has released survey results on how investment banks, brokers, and wholesale insurance firms handle non-financial misconduct allegations. Covering over 1,000 firms from 2021 to 2023, the survey revealed an increase in reported cases, with bullying, harassment (26%), and discrimination (23%) being the most common. The FCA noted that a high number of reports could reflect a culture where staff feel safe to speak up, while low reporting may signal issues. Firms primarily identified concerns through formal processes and whistleblowing. The FCA encourages firms to benchmark their practices against these findings to improve workplace culture, with trade bodies aiding in industry-wide analysis.