Posts in Regulation
Westpac and the Laws of (advice) Robotics

Smarter Compliance. The financial advice market is, depending on your perspective, either evolving or being disrupted. Technology - digital advice - presents a compelling alternative to the expense and risk of traditional distribution models. But, before we despair about the unfairness of replacing advisers with computers and algorithms (or celebrate the emergence of an objective and unbiased advice service) it’s important to appreciate that the models have similar issues and that while the nature of regulation may change, it’s as essential as it is now.

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A Change is Gonna Come: ASIC in action

Smarter Compliance. ASIC’s report 615 “ASIC Enforcement Update July to December 2018” provides a snapshot of the prosecutions, bannings and investigations they undertook. It’s an impressive list but is, in our view, a low water-mark for 2019 activity. With increased funding, a bigger and better toolkit and a renewed willingness to act, ASIC seem to be better positioned to effectively, efficiently and consistently regulate the financial advice industry. Expect a king-tide of regulatory activity in 2019.

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The end of grandfathering: Conflicts, the Constitution and Compulsory Acquisition

Smarter Compliance. On 22 February 2019, Treasury released exposure draft legislation titled Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 which, if ever introduced, passed and enacted, will prohibit the payment to financial advisers of grandfathering conflicted remuneration. These amendments could have a significant effect on the advice industry. However, there’s still time for consultation, so this article summarises the key issues and the challenges posed by the proposed regulations. It’s no substitute for specific legal advice, but it’s considerably cheaper and more accessible.

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Don't forget to tell: Mandatory Data Breach Notification laws

Smarter Compliance. Since 23 February 2018, entities subject to the Privacy Act have had a legal obligation to record, manage and report ‘eligible data breaches’. If you were subject to the Australian Privacy Principles, you’re required to report data breaches but some Licensees may still be unfamiliar with their obligations. This post addresses the requirements, makes recommendations and provides some additional reading on data breaches.

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Hold on, I'm Comin': ASIC & the BankingRC

Smarter Compliance. In their February 2019 Update, ASIC noted that “There are 12 recommendations that are directed at ASIC, or where the Government’s response requires action now by ASIC, without the need for legislative change. ASIC is committed to fully implementing each of these,” This article provides a high level view of the recommendations and ASIC’s responses.

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Change or be changed: The challenge for advice

Smarter Compliance. This year will be a challenging and momentous year. Change may be inevitable and irresistible, but it needn’t be fatal. The better licensees and advisers have already separated themselves from the pack and started to transform themselves to succeed in the new environment. This article explores what they’re doing and how they’re doing it. Don’t be left behind.

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Always on my mind: Licensees' approach to breach reporting

The Banking Royal Commission quickly and easily exposed profound and systemic non-compliance with the breach reporting obligations. Breach reporting may be "an important part of the regulatory framework" but the Commission’s hearings (and the Interim Report) show that, “on more than one occasion”, Licensees materially failed to comply with this obligation. Worryingly, they appeared to have suffered no consequences as a result of their failures. ASIC’s Report 594 on compliance with the breach reporting obligations highlights the extent of, and reasons for these failures. This article looks at three key take-outs for Licensees seeking to avoid regulatory censure.

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The writing’s on the wall: ASIC enforcement and focus

With the first half of the year now behind us, ASIC have recently released REP 585 (ASIC enforcement outcomes: January to June 2018). It highlights their activity in early 2018 (focusing on some notable successes) and looks forward to hint at what we can expect from them in the next six months. This article focuses on the report, ASIC’s plans for the remainder of 2018 and what they mean for Licensees and advisers.

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Anticipating ASIC: Get your house in order

In his recent speech “The trust deficit and superannuation, ASIC Chair James Shipton suggested three issues that Licensees need to address to restore trust and confidence in the financial services industry.

This post explores those suggestions in context, and outlines some practical steps Licensees should take in anticipation of future ASIC activity.

Take the time now to get your house in order.

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Review and remediation: "make it right"

Monitoring and Supervision, Consequence Management and Remediation are three elements of a compliance framework that best highlight, or expose, a Licensee’s capability and competence. Not only do they reveal fundamental aspects of a Licensee’s organisational competence but, more importantly, they expose its values, principles and standards.

This article examines explores ASIC’s views and provides tips for better results.

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AFCA: Disclosure and relief

The Australian Financial Complaints Authority (AFCA) is a new super-EDR scheme that will hear complaints against financial institutions including Australian Financial Services Licensees, credit providers and credit representatives, superannuation funds (other than self-managed superannuation funds), approved deposit funds, life insurers and general insurers. Although AFCA doesn’t open for business until later in 2018, Licensees (and others) need to consider membership and the consequential changes they’ll need to make to their disclosure documents and websites. This article explains ASIC’s relief and the extended transition timetable.

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The inevitability of conflicts: Managing and disclosing conflicts of interests

Conflicts of Interest seem endemic in financial services. The Banking Royal Commission has identified potential conflicts in the mortgage broking and lending sector. Approaches to conflicts are not consistent across the financial services industry. This post examines the key elements and, with a focus on mortgage broking, proposes some solutions for the identified problems.

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A pox on both your houses: ASIC, mortgage brokers and conflicts

The mortgage broking industry has, for a variety of reasons, recently attracted an increased degree of regulatory attention. In the midst of a Royal Commission this is hardly likely to comfort alert mortgage brokers . As the Banks, that both dominate and compete with the mortgage broking industry, identify problems and propose solutions, brokers are left to puzzle out the likely consequences of these discussions. This article explores the reasons and the drivers for the anticipated reforms of the mortgage broking industry. 

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Stop me if you've heard this one: Mandatory Data Breach Notification laws

You’re probably aware that, since 23 February 2018, entities subject to the Privacy Act have had a legal obligation to record, manage and report ‘eligible data breaches’. If you’re currently subject to the Australian Privacy Principles, you’re now required to report data breaches. This post addresses the changes, makes recommendations and provides some additional reading on data breaches and the new requirements. 

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An Adviser's guide to cryptocurrency

Cryptocurrencies may have been “the future of money since 2009”, but digital currencies – like Bitcoin, Ripple and Ethereum – are only now being enthusiastically embraced by the general public. This guide for Financial planners addresses the inherent risks and benefits of cryptocurrencies and Regulators' response to their increasing fervour for virtual currencies. The guide considers whether, and to what extent, digital currencies can be considered alternative assets. It explores the practical challenges advisers face in dealing with cryptocurrencies and provides a number of tips to avoid trouble. 

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"Hurry Up and Wait": Cost, complexity and service standards

ASIC's industry funding model commenced on 1 July 2017. Designed to ensure that those who create the need for, and benefit from, increased regulation (and increased regulatory attention) bear the costs of these benefits, it proposes that the costs of ASIC’s activities will be recovered through a combination of "ongoing levies on regulated entities and individual fees for user-initiated regulatory functions (such as licence applications)." The "fees for user-initiated regulatory functions", and ASIC's new Service Charter, are the subjects of this article.

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AFCA: Old wine in a new bottle?

The central plank of the Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Bill 2017 (‘the AFCA Bill’) is the establishment of a single not-for-profit external dispute resolution (EDR) body with a broad jurisdiction. This new super-EDR will hear complaints against financial institutions including Australian Financial Services Licensees, credit providers and credit representatives, superannuation funds (other than self-managed superannuation funds), approved deposit funds, life insurers and general insurers. The ABA thinks it's a great idea but I have some reservations. 

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Complexity, clarity and 'best interests'.

The financial services industry has much to recommend it; it’s complex, uncertain, frequently changing, over-regulated and highly scrutinised. These elements make it a challenging and dynamic industry, but it’s precisely these conditions that make the emergence of an advice profession both necessary and inevitable. We're mired in complexity, but perhaps by prioritising outcomes over processes we'll achieve both improved clarity and better consumer outcomes. 

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The 2015 Season: Compliance, Culture and Responsibility

The Financial Service Industry's obsession with "compliance" is unhealthy and counterproductive; it creates unrealistic expectations of error-free business, ingrains negativity bias in the corporate DNA and shields management incompetence from proper scrutiny. The solution isn't to abandon regulation but rather to reframe the game around players' responsibilities.

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