Financial services monthly wrap-up: March 2020

March 2020 has seen a number of responses from the Government, regulators, associations and industry generally addressing issues and risks from the outbreak of the coronavirus (COVID-19). This update includes key regulatory responses in the wake of COVID-19 for the funds and financial services sector. Of the notable developments outside COVID-19, on 10 March 2020 the Australian Securities and Investments Commission (ASIC) published its new regulatory guidance on the foreign financial services providers licensing regime.


ASIC releases new regulatory regime for foreign financial services providers

On 10 March 2020, ASIC published its media release which announced the new regulatory framework for foreign financial services providers (FFSPs) providing certain financial services to wholesale clients in Australia. The new regulatory regime introduced:

  • a new foreign Australian financial services (AFS) licensing regime for FFSPs; and
  • an exemption for the requirement to hold an AFS licence for providers of funds management financial services seeking to induce certain types of professional investors.

In accordance with the transitional arrangements, FFSPs currently relying on the pre-existing sufficient equivalence relief will have a two-year transition period until 31 March 2022 to make arrangements as to their services in Australia, which may include applying for a foreign AFS licence. The foreign AFS licensing regime has also been extended to include other sufficiently equivalent jurisdictions, including Denmark, Sweden, France and Ontario. The limited connection relief will continue to be available until 31 March 2022.

We have prepared a detailed analysis of the updated FFSP regime which is available on our website. We recommend asset managers, foreign banks, funds and other offshore institutions start weighing up their options and which regime is best for them.

ASIC takes steps to ensure equity market resiliency

In accordance with the Government’s response to COVID-19, ASIC has published a media release on 16 March 2020 highlighting its steps to ensure Australian equity markets remain resilient. As a result of the exponential growth in trading volumes in the first two weeks of March 2020, ASIC and the Council of Financial Regulators agencies have been closely monitoring financial markets to ensure they remain fair and orderly.

ASIC has issued directions under the ASIC Market Integrity Rules to a number of large equity market participants, mandating a limit on the number of trades executed each day. Further information is available in ASIC’s Media Release.

ASIC recalibrates regulatory priorities as response to COVID-19 challenges

On 23 March 2020, ASIC and the Council of Financial Regulators announced that until at least 30 September 2020, ASIC will focus its regulatory efforts on challenges created by the COVID-19 pandemic. Priority will be given to areas where there is risk of significant consumer harm, serious breaches of the law, as well as risks to time-critical matters and issues regarding market integrity.

As a result of this re-prioritisation, ASIC has suspended a number of activities which are deemed not to be time-critical, including consultations, regulatory reports and reviews, as well as ASIC’s report on executive remuneration, internal dispute resolution guidance and its consultation paper on managed discretionary accounts. ASIC’s on-site supervisory surveillance, such as the Close and Continuous Monitoring Program, will also be suspended. More information is available on ASIC’s website.

APRA adapts 2020 agenda to prioritise COVID-19 response

The Australian Prudential Regulatory Authority (APRA) noted in its media released dated 23 March 2020 that it has suspended the majority of its planned policy and supervision initiatives as a response to the impact of COVID-19. In line with ASIC’s approach, APRA is also suspending all substantive public consultations, including those on prudential and reporting standards, at least until 30 September 2020.

The primary supervision focus of the regulator will be on monitoring the impact of COVID-19 on the financial and operation capacity of its regulated institutions. As part of its refocused supervision efforts, APRA will frequently be in communication with entities to address concerns regarding capital and liquidity requirements, as well as possibly amending the implementation dates and transition times for prudential and reporting standards. Further information can be found in APRA’s Media Release.

Council of Financial Regulators’ statement on COVID-19

The Council of Financial Regulators (Council) published a statement on 16 March 2020 noting the impact of COVID-19 on Australia’s financial systems and adjustments being made to ensure our financial markets continue to operate and credit is available to businesses and households. The Council had scheduled to meet with Australia’s major lenders to understand how they can be support households and businesses and highlighted the need to provide relief or waiver of regulatory requirements during this period.

The Council is the co-ordinating body for Australia’s main financial regulatory agencies, comprising APRA, ASIC, Australian Treasury and the Reserve Bank of Australia. A copy of the Council’s media release is available on its website.

COVID-19 and access to superannuation

The Australian Government has announced that eligible individuals affected by COVID-19 can access early up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21. In order to be eligible, individuals must satisfy any one of the following requirements:

  • they are unemployed;
  • they are eligible to receive a JobSeeker Payment, Youth Allowance for job seekers, Parenting Payment (which includes the single and partnered payments), Special Benefit or Farm Household Allowance;
  • on or after 1 January 2020:
    • they are made redundant;
    • their working hours were reduced by 20 per cent or more;
    • if they are a sole trader, their business was suspended or there was a reduction in their turnover of 20 per cent or more.

Those accessing their superannuation early in this manner will not pay tax on the amounts released. Eligible individuals can apply for early release of their superannuation from 20 April 2020. 

The Coronavirus Economic Response Package Omnibus Act 2020 (Act) was fast tracked through parliament and received Royal Assent on 24 March 2020, amending the Superannuation Industry (Supervision) Regulations 1994 (Cth) to allow for this early release of benefits due to COVID-19. 

On the flipside, the Act also allows retirees to defer access by reducing the minimum payments that must be made from an annuity or pension product by half, for both the 2019-20 and 2020-21 financial years. The measures introduced seek to allow pension and annuity account balances to recover from the capital losses from the impact of COVID-19, allowing retirees to reduce their drawdowns and the need to sell assets in loss positions in order to fund income stream payments. 

Individuals should seek financial advice to understand the impact on their future balance and how early access may affect their income protection insurance and/or Life / Total Permanent Disability insurance cover. Further information may be found on the Australian Tax Office’s website.

APRA releases 12 month progress update on Royal Commission recommendations

On 2 March 2020, APRA published an update on its progress in responding to the 10 recommendations directed by Commissioner Hayne at the regulator. In particular, APRA has addressed three recommendations in full, regarding the valuations of land by amending APS 220 Credit Risk Assessment (recommendation 1.12), has updated the memorandum of understanding between ASIC and APRA as to how they intend to work in the future (recommendation 6.10) and the introduction of its internal governance arrangements and accountability statements for senior executives.

APRA has been making progress to finalise the remaining seven recommendations, which include the supervision of remuneration, additional scrutiny for related party engagements for group life insurance policies and giving effect to the Financial Accountability Regime. APRA is still in the process of investigating the 12 case referrals, including reviewing considerable documentary evidence and obtaining independent legal advice. APRA’s full report on its progress of the recommendations made from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission) is available in APRA Insight 2020 Issue One.

Inquiry into the Future Directions for the Consumer Data Right

Treasury released on 6 March 2020 an Issues Paper for public consultation on the Inquiry into Future Directions for the Consumer Data Right (Inquiry). The Inquiry is assessing how the Consumer Data Right may be enhanced and leveraged in order to boost innovation and competition, as well as support the development of a safe and efficient digital economy.

In particular, the Issues Paper addresses how a ‘write’ access could potentially be added to the consumer data right, allowing consumers to direct a trusted third party to change or add to the customer’s data held by the data holder. Public consultation on the Issues Paper closes on 23 April 2020. Further information on the Inquiry including a copy of the Issues Paper is available on Treasury’s website.

ASIC consults on advice fee consents and independence disclosure

In the Royal Commission, Commissioner Hayne made a number of recommendations relating to an annual renewal and payment of ongoing fee arrangements, limitations on deducting advice fees from superannuation choice accounts and disclosure of lack of independence. On 10 March 2020, ASIC released Consultation Paper 329 seeking feedback on ASIC’s proposed draft legislative instruments and guidance on ongoing fee arrangements.

Consultation Paper 329 addresses recommendations relating to persons who provide personal advice to retail clients, superannuation trustees and their professional advisers. Feedback on the consultation closes 7 April 2020, subject to any timetabling changes as a result of COVID-19. Further information on the proposals as well as ASIC’s Consultation Paper 329 and draft instruments is available in ASIC’s Media Release.

ASIC releases information sheet on document production guidelines

On 2 March 2020, ASIC released guidance addressing document production guidelines for people who produce books, including documents and any other record of information, to the regulator in connection with investigations or surveillance activities.

Information Sheet 242 Document production guidelines provides further information on:

  • the preferred methods for producing books to ASIC in electronic and hard copy form;
  • the benefits of producing books in accordance with the guidelines;
  • the consequences of not following the guidelines; and
  • how ASIC requests book to be produced when using a litigation support system.

More detailed information on ASIC’s guidance for document production is available in Information Sheet 242.



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