October was another busy month in the financial services regulatory space. ASIC issued a number of new legislative instruments to continue the relief available under sunsetting class orders, while also removing certain notification obligations under the reportable situations regime. Interestingly, these changes were followed by ASIC’s second publication on insights from the reportable situations regime, which found little improvement in the key areas of concern identified in its first publication on the regime in October 2022. Meanwhile, APRA consulted on proposed changes aimed at increasing visibility of how superannuation members’ money is spent and invested, including plans to publish total fund expenditure and expanded asset allocation data by mid-2024. Treasury also commenced numerous consultations, including the proposed regulation of digital asset platforms. Cooperative regulation was also a feature during October, with ASIC and APRA publishing two joint discussion papers on plans to enhance the data collections for the life and general insurance industries, and an information pack to assist entities in the banking, insurance and superannuation industries in implementing the Financial Accountability Regime.
AUSTRAC also warned businesses providing a designated service of the urgent need to enrol with AUSTRAC or risk increased penalties under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth).
1 ASIC releases second publication on insights from the reportable situations regime
On 31 October 2023, ASIC released its second publication on information lodged under the reportable situations regime. The reportable situations regime (previously known as “breach reporting”) requires Australian financial services licensees and credit licensees to submit notifications to ASIC about “reportable situations”.
ASIC reported that during the 2023 financial year, more than 16,000 reports were made to ASIC under the regime. The publication shows that little improvement has been made in the key areas of concern identified in the first publication on insights from the regime.
The publication found, among other things:
- only 11% of the licensee population have lodged a report, indicating that some licensees may not be complying with the regime;
- licensees are still taking too long to identify and investigate some breaches, with 17% of reports received having taken more than one year for the licensee to identify and commence an investigation into the issue after it had first occurred;
- a significant number of remediation activities are taking too long to complete, with 247 reports (8% of the total reports involving compensation to customers) having taken more than one year to finalise compensation; and
- there remain opportunities to improve identification and reporting of the root causes of breaches, with 66% of breaches found to be due to staff negligence or error.
Information from ASIC on the reportable situations regime can be accessed here. The second publication on insights from the reportable situation regime can be accessed here. The full media release can be accessed here.
2 ASIC and APRA commence joint administration of the new Financial Accountability Regime
On 3 October 2023, ASIC and APRA published an information package to support the financial services industry in implementing the Financial Accountability Regime (FAR).
The FAR will apply to banks, insurance companies and superannuation funds, andtheir directors and senior executives. It imposes a strengthened responsibility and accountability regime to improve the risk and governance cultures of Australia’s financial institutions.
The information pack comprises:
- the Joint Administration Agreement between APRA and ASIC setting out the framework within which the regulators will work together to administer the FAR; and
- a joint information paper providing guidance for authorised deposit-taking institutions (ADIs) on transitioning from the Banking Executive Accountability Regime to the FAR, supported by the ADI accountability statement guidance and template.
The FAR comes into force on 15 March 2024 for the banking industry and on 15 March 2025 for superannuation funds and insurers.
3 ASIC remakes financial reporting legislative instrument
On 10 October 2023, ASIC announced that it made the ASIC Corporations (Financial Reporting by Stapled Entities) Instrument 2023/673 to extend the relief previously provided under ASIC Class Order [CO 13/1050] Financial reporting by stapled entities to 1 October 2028.
This relief allows stapled entities which are disclosing entities to present combined financial statements or consolidated financial statements of the stapled group. It also allows the stapled entities in a stapled group to present their respective financial statements together in a single financial report.
The full media release can be accessed here.
4 ASIC releases 2022-23 Annual Report
On 13 October 2023, ASIC released its annual report for the 2023 financial year reaffirming its strong focus on enforcement action, driving positive outcomes for consumers and small businesses, and maintaining trust and integrity in Australia’s financial system.
In the 2023 financial year, ASIC enforcement action led to 35 criminal convictions and $190 million in civil penalties. During the same period, ASIC also commenced more than 130 new investigations. ASIC confirmed that over the past seven years, it has overseen more than $7 billion of remediation to an estimated 8.42 million Australian consumers.
ASIC also set its priorities for the 2023-24 financial year to reflect key trends and emerging issues in the regulatory framework. These include the growth of sustainable finance, Australia’s ageing population, new and disruptive digital technologies, and product design and distribution.
5 ASIC releases first integrated financial reporting and audit surveillance report for 2022-23
On 18 October 2023, ASIC released the findings from its first integrated financial reporting and audit surveillance program for the 2023 financial year. The program focuses on financial reports and audits of listed entities, significant public interest entities or other unlisted entities of interest.
ASIC’s surveillance found that preparers and auditors of financial reports need to focus on accounting for non-financial assets, asset values, revenue recognition and disclosure of material business risks. As a result, adjustments of $215 million were made to previously released financial information from ASX-listed companies and other large entities.
ASIC also announced it expects all audit firms to focus on audit quality and identify and address the root cause of audit findings. Those expectations include developing and implementing action plans to foster an effective and sustainable audit quality system.
6 ASIC modifies licensees’ obligations under reportable situations regime
On 19 October 2023, ASIC announced that it made the ASIC Corporations and Credit (Amendment) Instrument 2023/589 (Instrument 2023/589). This instrument removes the notification obligations in respect of certain reportable situations under the reportable situations regime from 20 October 2023.
Under the reportable situations regime, Australian financial services licensees and Australian credit licensees must submit notifications to ASIC about any deemed “significant” breaches of “core obligations” under section 912D of the Corporations Act 2001 (Cth) (Corporations Act) and section 50A of the National Consumer Credit Protection Act 2009 (Cth).
Instrument 2023/589 excludes, subject to certain qualifying criteria, certain breaches of the misleading or deceptive conduct provisions in section 1041H(1) of the Corporations Act and section 12DA(1) of the Australian Securities and Investments Commission Act 2001 (ASIC Act) and the false or misleading misrepresentations provision in s12DB(1) of the ASIC Act, from being deemed significant breaches of a core obligation.
Instrument 2023/589 also extends certain reporting deadlines and amends section 912D(3) of the Corporations Act to reflect the changes to the “financial services law” definition made by the Treasury Laws Amendment (2023 Law Improvement Package No. 1) Act 2023 (Cth).
The full media release can be accessed here.
7 ASIC and APRA release notes on fifth Superannuation CEO Roundtable
On 20 October 2023, ASIC and APRA released the public notes on the fifth Superannuation CEO Roundtable. The Roundtable focused on sustainable finance disclosures and the Retirement Income Covenant.
8 ASIC signs memorandum of understanding with the International Association of Insurance Supervisors
On 24 October 2023, ASIC announced the signing of the International Association of Insurance Supervisors (IAIS) Multilateral Memorandum of Understanding (MMoU), an international supervisor cooperation and information exchange agreement.
The MMoU provides a global framework of compliance and confidentiality to facilitate cooperation and exchange between insurance supervisors. Through membership in the MMoU, signatories can exchange information and assistance, thereby promoting financial stability and adequate supervision of cross-border insurance operations.
9 APRA consults on increased transparency of super fund expenditure
On 10 October 2023, APRA commenced consultation on proposed changes to increase visibility of how superannuation members’ money is spent and invested.
APRA is proposing to publish:
- total expenses for the industry by category and by internal, related outsourced and non-related outsourced arrangements for administration and operating expenses and for investment expenses;
- total expenses at individual fund level by category, including expenditure for marketing and sponsorships, industrial bodies, related parties, director and executive remuneration, and political donations by payee or service provider;
- total expenses with the name of the service provider where the provider is a promoter (such as a third party that receives a benefit for marketing a fund); and
- additional aggregated asset allocation data for fund investments in property and infrastructure, alternative strategy funds, listed equity and private equity. APRA will seek trustee feedback on publishing the data at an individual fund level as well.
The consultation, which will include two roundtable discussions with trustees and other industry stakeholders, closes on 29 November 2023.
The media release can be accessed here.
10 APRA publishes updates to the Superannuation Data Transformation frequently asked questions
On 4 October 2023, APRA published two new and three updated frequently asked questions (FAQs) on the Superannuation Data Transformation (SDT) project.
In addition, APRA also updated the two worked examples on reporting investments under Reporting Standard SRS 550.0 Asset Allocation, including providing further examples of reporting on derivatives. The new and updated FAQs can be accessed here. The full media release can be accessed here.
11 APRA releases second edition of new quarterly superannuation statistical publications
On 5 October 2023, APRA released its Quarterly Superannuation Product Statistics and its Quarterly Superannuation Industry publication for the June 2023 quarter.
The Quarterly Superannuation Product Statistics publication lists all superannuation products offered by each APRA-regulated superannuation fund and contains information on fees and costs, investment performance, investment strategy and asset allocation for a range of products and investment options. The Quarterly Superannuation Industry publication presents industry-level data on products and member demographics.
The publications for the September 2023 quarter are due to be published in December 2023.
12 APRA publishes notes from the Superannuation Data Transformation Strategic Forum
On 6 October 2023, APRA published notes from the Superannuation Data Transformation (SDT) Strategic Forum. The forum provides an opportunity for APRA to obtain information from key stakeholders on challenges faced by both APRA and superannuation trustees in implementing and transitioning to the new superannuation data collections.
13 APRA releases letter on the revocation of superannuation standards
On 10 October 2023, APRA issued a letter to all registrable superannuation entity (RSE) licensees on the revocation of superannuation Reporting Standard SRS 534.0 Derivative Financial Instruments (SRS 534.0).
14 APRA publishes AASB17 updates to the Insurance FAQs
On 11 October 2023, APRA published four new frequently asked questions on the Australian Accounting Standards Board (AASB17) collections, which include instructions in the “Access” section for insurers’ external auditors who wish to gain access to APRA Connect.
15 APRA releases 2022-23 annual report
On 12 October 2023, APRA released its annual report for the 2023 financial year.
The report found that despite various and significant international and domestic challenges, the Australian financial system remained fundamentally sound throughout 2022-23.
The annual report and media release can be accessed here.
16 APRA and ASIC release consultation on general insurance and life insurance data collections
On 12 October 2023, APRA and ASIC published two joint discussion papers on plans to enhance data collection for the life and general insurance industries.
APRA and ASIC propose to collect more granular data as part of the Insurance Data Transformation (IDT) project to enable regulators, policymakers and insurers to undertake a more comprehensive assessment of the risks faced by thesw industries.
Submissions close on 22 December 2023.
17 APRA and ASIC publish 2022-23 data on life insurance claims and disputes
On 17 October 2023, APRA released its Life Insurance Claims and Disputes Statistics publication for the 2023 financial year, which presents the key industry and entity-level claims and disputes outcomes for 17 Australian life insurers writing direct business (i.e. excluding reinsurance).
ASIC’s MoneySmart Life insurance claims comparison tool, which compares insurers across cover types and distribution channels on four metrics (the percentage of claims accepted, the length of time taken to pay claims, the number of disputes and the policy cancellation rates), has been updated with the latest data.
18 APRA releases latest points of presence statistics for authorised deposit-taking institutions
On 18 October 2023, APRA released its 2023 ADI points of presence statistics – a detailed list of physical banking service channels provided to Australians, including branches, ATMs and EFTPOS facilities.
The statistics indicate an 11% reduction in branches across Australia (representing 424 branches), which includes a 7% reduction (122 branches) in regional and remote areas.
In connection with this, APRA announced that it was closely following the progress of the Senate inquiry into bank closures in regional Australia and would continue to support its work.
19 APRA releases annual general insurance institution-level statistics for June 2023
On 24 October 2023, APRA released its annual general insurance institution-level statistics for June 2023, which contains individual insurance group information about financial performance, financial position, capital adequacy and key ratios.
20 APRA releases “Operations of Private Health Insurers” Annual Report
On 25 October 2023, APRA released its Operations of Private Health Insurers Annual Report for the 2023 financial year, which shows expenses, revenues and operational information about private health insurers.
21 AUSTRAC warns businesses providing designated services to enrol before 9 November 2023 to avoid increased penalties
On 24 October 2023, AUSTRAC published a warning to businesses that have provided a designated service(such as financial or gambling services) for at least 28 days, to enrol with AUSTRAC by 9 November 2023 to avoid increased penalties. The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 was recently amended to clarify that unenrolled businesses that continue to provide designated services could be liable for a penalty of up to 12 penalty units ($3,756), or up to 60 penalty units ($18,780) for bodies corporate, for each day that the business remains unenrolled.
The full media release can be accessed here.
22 Treasury consults on proposed regulation of digital asset platforms
On 16 October 2023, Treasury commenced consultation on a proposed regulatory framework to address consumer harms in the crypto ecosystem, while supporting innovation.
The proposed regulatory framework would apply to digital asset platforms that present similar risks to entities that operate in the traditional financial system. The framework also leverages on the existing Australian Financial Services Licence framework to regulate digital asset platforms to ensure consistent oversight and safeguards for consumers.
The consultation period ends on 1 December 2023.
The proposal paper and factsheet can be accessed here.
23 Treasury consults on proposed changes to superannuation tax concessions
From 3 October 2023 to 18 October 2023, Treasury consulted on the Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 and the Superannuation (Better Targeted Superannuation Concessions) Imposition Bill 2023, to enact changes to superannuation tax concessions announced in the 2023-24 Budget.
The exposure draft legislation proposes:
- Reducing the tax concessions for individuals with a total superannuation balance (TSB) above $3 million, by imposing an additional 15 per cent tax on certain earnings under a new Division 296 of the Income Tax Assessment Act 1997; and
- Amending several Acts to provide for the calculation of earnings, withdrawals and contributions, modifications for earnings of certain constitutionally protected interests, debt deferral provisions for defined benefit interests in the pre-end benefit phase, and changes to the definition of TSB.
Treasury announced that rules for modified treatment of defined benefit and some retirement phase interests will be addressed in subsequent regulations.
The exposure draft legislation and explanatory materials can be accessed here.
24 Treasury consults on superannuation guarantee entitlements
From 9 October 2023 to 3 November 2023, Treasury invited submissions from industry and stakeholders on implementing payday superannuation and a redesigned compliance framework to encourage employers to pay their super as close as possible to payday.
The consultation followed the 2023-24 Budget announcement that employers would be required to pay their employees’ superannuation and guarantee entitlements on the same day that they pay salary and wages. Subject to the passage of legislation, the Securing Australians’ Superannuation package will commence from 1 July 2026.
The consultation paper can be accessed here.
25 Treasury releases 2022-23 annual report
On 18 October 2023, Treasury released its annual report for the 2023 financial year. The annual report outlines performance against outcomes, program and performance information contained in the Portfolio Budget Statements 2022-23, Portfolio Additional Estimates Statements 2022-23, and the Treasury Corporate Plan 2022-23.
The annual report can be accessed here.