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Financial Regulation Update

Awareness of the latest financial regulation and compliance trends is imperative. However, investing time and effort in professional development within an expeditiously changing financial services industry is challenging. You must be at the forefront of your practice to meet that challenge. Here are some significant developments from September 2022, analysis and practical considerations for the future.

Licensing update (ASIC): 

Recently, the division’s resourcing, consistency and strategy were discussed, together with other matters. For example, an issue in licensing when RMs go for multiple roles is that they must repeatedly prove their competence. ASIC is aware of this and obtains data from various storage areas within the organisation.

ASIC plans to utilise AI to aggregate data on individuals to accelerate the process each time an RM or Director needs approval, i.e. the information will be pre-populated. This is convenient and logical. However, here is the exciting part. The aggregated data concerning individuals across ASIC’s divisions will eventually be used to assess Financial Accountability Regime (FAR 2022) Accountable Persons.

This occurs in the UK, where the approved person and senior managers regimes, which govern regulation and accountability, have been in place far longer. However, it is different for Australians.

‘Best interest’ duty (Court): 

The Federal Court has ordered a $7.2 million penalty on Dixon Advisory for advice failures. The Court concluded that on 53 occasions, Dixon Advisory was the responsible licensee of six advisors who acted not in the best interests of eight clients. They advised these clients to acquire, rollover or retain interests in the US Masters Residential Property Fund-related products. Those representatives did not investigate the client’s circumstances reasonably before providing advice.

Such inappropriate advice resulted in the client’s self-managed superannuation fund needing to be more diversified. It was therefore exposed to the risk of capital loss. The Court asserted: ‘There is no evidence that the (Dixon Advisory) representatives conducted the necessary reasonable investigations into the recommended financial products or any alternative financial products, nor is there evidence that they considered the personal circumstances of the clients.’

Superannuation financial regulation: 

ASIC Commissioner Danielle Press issued a speech to the AIST Conference of Major Superannuation Funds, stating that there are three critical areas for super funds to now be focused on:

1) capture and embrace the data in the super system to understand the financial future of Australians better;

2) how to respond to consumer harms should they emerge. This includes identifying breaches of the law, internal-dispute resolution mechanisms and improving remediation practices; and 3) trustees’ obligations relating to market integrity.

In a good speech, with a sting in the tail at the end, Ms Press stated that earlier, principal expectations of super funds remained the same. The other constant is our willingness to take enforcement action where funds fall foul of the law. It strongly encourages trustees to engage in an open and transparent dialogue with ASIC. If there are warranted concerns and a civil penalty action against the trustee, this may be considered by the Courts.

Entain group (AUSTRAC): 

AUSTRAC initiated an enforcement investigation into Entain Group after an extensive supervisory campaign that assessed entities within the corporate bookmaker’s sector. The investigation focused on whether Entain has complied with obligations under the AML/CTF Act, and AUSTRAC’s stated focus is that other corporate bookmakers sector take notice. However, announcing an investigation instead of a finding is a little odd. For example, if AUSTRAC finds nil, but the company has suffered due to the bad press in the interim? More intriguing is that there is more pressure to find something once you have made the statement publicly.

M&D financial regulation: 

A reminder of how severe ASIC takes being told the truth under s.1308(3) of the Corporations Act 2001(Cth) is that ASIC alleged that in May 2020, Mrs De Oliveira made a false statement lodged to ASIC to deregister Shiera Wellbeing Centre voluntarily.

ASIC alleged that Mrs De Oliveira falsely claimed that Shiera Wellbeing Centre did not have any outstanding debts when in actuality, Shiera Wellbeing Centre had an outstanding debt after an order from the Queensland Civil and Administrative Tribunal. As a result, she was convicted and fined.

For future consideration: A cryptocurrency mixer known as Tornado Cash was sanctioned by the US in August 2022. Tornado Cash is an open-sourced, self-executing protocol, making it the first time a piece of software has been sanctioned rather than a legal entity. This approach has many legal questions and unintended consequences, but it is notable for its significant development!

Vogue Advisory Group – we are here to help.

Professional financial advice can make a difference if you are in the initial stages of your working life, planning to expand your family, or are well-established and looking towards retirement. If you require financial advice, please get in touch with us, and one of our experienced financial advisors will assist you.