Financial services monthly wrap-up: February 2022

ASIC remakes ‘sunsetting’ class order on general insurance orders

Following consultation, on 21 February 2022, ASIC extended Class Order [CO 11/842] PDS requirements where a quote for a general product is given for a further five years. The class order relief was due to expire on 1 April 2022.

Under the class order relief, general insurers are permitted to provide insurance quotes over the phone without the need for a PDS. The form of class order relief remains largely unchanged.

A link to the ASIC media release can be found here.

ASIC and the RBA update memorandum of understanding with European Securities and Markets Authority

On 18 February 2022, ASIC and the RBA updated their Memorandum of Understanding (MoU) with the European Securities and Markets Authority (ESMA).

The MoU establishes regulatory and supervisory cooperation arrangements between ASIC, ESMA and the RBA with respect to Australian central counterparties (CCPs) recognised or seeking recognition in the European Union. The MoU was updated to reflect key amendments to the European Market Infrastructure Regulation relating to CCPs and came into effect on 9 February 2022.

A link to the ASIC media release can be found here.

ASIC releases for consultation updated relief for remaking PDS, superannuation and FSG legislative instruments

On 18 February 2022, ASIC released Consultation Paper 358 Remaking ASIC relief on PDSs, superannuation dashboards and FSGs (CP 358) for consultation.

CP358 outlines ASIC’s proposals to:

• remake, in a single new instrument, relief relating to PDS in-use notices for employer-sponsored superannuation and product dashboard disclosure – Class Orders [CO 12/415], [CO 13/1534] and [CO 14/443]);
• remake, in a single new instrument, relief relating to shorter PDSs and PDS obligations for superannuation trustees, IDPS operators and responsible entities of IDPS-like schemes – Class Orders [CO 12/749] and [CO 13/797] and ASIC Corporations (Superannuation: Investment Strategies) Instrument 2016/65;
• remake, as a new instrument, an instrument relating to Financial Services Guides in time critical situations – Class Order [CO 12/417]; and
• give effect to these new instruments until 1 October 2027.

As part of its proposal, ASIC will omit certain relief that is no longer relevant and update certain conditions of relief.

A link to the ASIC media release can be found here and CP 358 here.

ASIC releases quarterly update for October to December 2021

On 3 February 2022, ASIC released its quarterly update for the period between October – December 2021. The update focused on four key areas for ASIC during the quarter:

• enforcement action taken by ASIC against misconduct;
• releasing corporate guidance to drive better governance outcomes;
• upholding and maintaining market integrity with a focus on investor protection; and
• assisting industry meet new legislative requirements through updated guidance and information.

A link to the ASIC media release can be found here and quarterly update here.

APRA issues new FAQs on outcomes assessment under the Superannuation Industry (Supervision) Act

On 24 February 2022, APRA published two new FAQs and five updated FAQs on outcomes assessment under the Superannuation Industry (Supervision) Act 1993 (Cth).

The new and updated FAQs set out APRA’s expectations for registrable superannuation entity (RSE) licensees to align their outcomes assessment and business performance review cycles.

A link to the APRA media release can be found here and FAQs here.

APRA publishes additional FAQs on Superannuation Data Transformation Phase 1 reporting standards

On 21 February 2022, APRA published further additional FAQs for RSE licensees to provide guidance on meeting the reporting standards for Phase 1 of the Superannuation Data Transformation project.

APRA also updated its FAQs to clarify reporting due dates and the reporting expectations for pooled superannuation trusts.

A link to the APRA media release can be found here. The FAQs are available on APRA’s website and can be found here.

APRA releases discussion paper on major increase in superannuation data transparency

On 18 February 2022, APRA released a discussion paper outlining its proposals to publish further superannuation data. This follows on from the finalisation of Phase 1 of APRA’s Superannuation Data Transformation project, where APRA determined 10 new reporting standards were required to address gaps in data reporting by superannuation trustees.

As part of its latest consultation paper, APRA proposes to publish from June 2022 aggregate industry, fund-level and product-level statistics containing key metrics, including on insurance arrangements, expenses, member demographics and asset allocation classifications. This will come after an eight week consultation period.

A link to the APRA media release can be found here and discussion paper here.

APRA releases note on managing compliance risk

On 17 February 2022, APRA released a note on managing compliance risk. Broadly speaking, compliance risk relates to an organisation’s ability to comply with the laws, rules, regulations and standards (both external and internal) which govern its operations, and the consequences that may flow from a failure to comply.

APRA acknowledges that managing compliance risk can be tricky. Each organisation’s compliance obligations will be driven by the industry in which it operates, the products and services it offers, and its approach to risk management. Examples of failures to manage compliance risk that have attracted significant fines include:

• failure to correctly treat customers (including charging deceased persons, double charging for products, and not applying package discounts);
• failure to meet anti-money laundering obligations; and
• privacy breaches.

Prudential Standard CPS 220 Risk Management sets out APRA’s requirements for risk management frameworks for an APRA-regulated institution. In practice, APRA is interested in an entity’s compliance management practices to examine their ability to:

• demonstrate and monitor compliance with prudential standards and APRA guidance; and
• meet non-prudential obligations and laws to gauge the adequacy of an entity’s risk frameworks, and risk management processes and practices.

In relation to managing compliance risks, APRA notes the need for entities to:

• have a clearly defined approach to managing compliance risk;
• have established processes to support compliance risk management practices; and
• specify clear accountability for managing compliance risk.

Moving forward, better practice for compliance risk management will continue to be a focus for APRA. APRA-regulated entities are encouraged to pay the same attention and prioritisation to compliance management risks as other business risks, such as cyber risk.

A link to APRA’s note can be found here.

APRA releases policy and supervision priorities for 2022

On 1 February 2022, APRA released its policy and supervision priorities for the next 12-18 months. These priorities are centred around APRA’s two strategic themes (as set out in its 2021-2025 Corporate Plan): “protected today” and “prepared for tomorrow”.

In summary, APRA’s key policy and supervision priorities for 2022 include:

• improving crisis preparedness, including by finalising CPS 190 Financial Contingency Planning (CPS 190) and CPS 900 Resolution Planning (CPS 900) on contingency and resolution planning, respectively;
• strengthening core requirements for strategic planning and member outcomes in superannuation, to align and reinforce the recent ‘Your Future, Your Super’ reforms;
• completing reforms to the insurance capital standards to align with the new accounting standard AASB17;
• continuing to work with Treasury and ASIC to implement the proposed Financial Accountability Regime;
• rectifying sub-standard industry practices in superannuation and eradicating unacceptable product performance;
• cyber risk preparedness and responsiveness across all APRA-regulated industries;
• continuing to focus on risk culture, including rolling out a risk culture survey to benchmark perceived risk behaviours and the effectiveness of risk structures within entities; 
• upgrading contingency and continuity frameworks; and
• ensuring sound insurance principles are applied in the insurance industries, with a focus on availability, affordability and sustainability of insurance.

A link to the APRA media release can be found here. A full copy of APRA’s policy priorities and supervision priorities can also be found here and here.