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Generative AI
Artificial intelligence (AI) raises many intellectual property (IP) issues.
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Australia | Publication | October 2020
The month of October 2020 has seen ASIC use its product intervention powers by imposing conditions on the issue and distribution of contracts for difference (CFDs) to retail clients as well as releasing updated guidance on unfair contract terms laws for insurance. The Federal Government has announced a number of key reforms, including changes to superannuation through the ‘Your Future, Your Super’ package reforms as part of the 2020-21 Federal Budget, as well as a review of the payments system to ensure it remains innovative and supportive of competition. APRA has issued a letter to RSE licensees regarding their controlling stake obligations, with both ASIC and APRA publishing their 2019-20 Annual Reports.
Following the initial consultation in August 2019, ASIC made a product intervention order on October 23, 2020 imposing numerous conditions on the issue and distribution of CFDs to retail clients. This follows concerns ASIC has had about the retail market for CFDs and a number of recent instances of misconduct by certain CFD issuers. During March and April 2020, it is reported that retail clients from a sample of 13 CFD issuers made a net loss of $774 million.
From March 29, 2021, ASIC’s product intervention order imposes the following:
The product intervention order will remain in force for 18 months, with the regulator given the power to extend the order or make it permanent. Further information about the order as well as ASIC’s key considerations is available in ASIC’s Media Release.
ASIC and the Reserve Bank of Australia (RBA) have set out their expectations surrounding the ASX’s replacement of its Clearing House Electronic Sub-register System (CHESS). On October 1, 2020 the RBA released its ‘October 2020 Assessment of the ASX Clearing and Settlement Facilities’, with one of its key findings being that the ASX should implement the new system for the clearing and settlement of cash equities trades as soon as this can safely be achieved by both the ASX and users of the CHESS system. The significance of replacing CHESS in a timely and safe manner comes particularly after record trading volumes and processing delays in March 2020 due to the impact of COVID-19. The ASX is expected to provide independent assurances to both ASIC and the RBA to demonstrate its readiness in migrating to the new system, as well as its resilience, availability, performance, recoverability and security. More information surrounding ASIC and the RBA’s expectations is set out in ASIC’s media release, as well as the RBA’s media release.
On October 15, 2020, APRA released a letter to RSE licensees reminding them of their obligations with respect to controlling stake requirements. APRA has advised licensees to review their current ownership structures, with the regulator observing that since the new requirements came into effect on July 5, 2019, RSE licensees and the person acquiring the controlling stakes may not have always considered the controlling stake requirements and approval process. Failure to obtain APRA’s approval prior to owning a controlling stake in an RSE licensee is a strict liability offence under section 29JCB of the Superannuation Industry (Supervision) Act 1993 (Cth).
An application for approval to hold a controlling stake in an RSE licensee must be considered when the ownership of shares in an RSE licensee changes. An application is required for a new RSE licensee and may also be required where there is a change in shareholdings for directors of an RSE licensee, where there is a restructure of a corporate group, acquisition of shares in the RSE licensee or its holding company, or where a successor fund transfer results in the transfer or issue of shares to a director or employer/employee organisation. An updated application form and instruction guide to owning or controlling an RSE licensee is now available on APRA’s website, including the letter to RSE licensees.
The Federal Government, with the Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator the Hon Jane Hume, have announced the ‘Your Future, Your Super’ package reforms to superannuation as part of the 2020-2021 Federal Budget. From July 1, 2021, the reforms seek to improve our superannuation system by:
More information about the ‘Your Future, Your Super’ reforms is available on Treasury’s website.
On April 5, 2021, unfair contract terms laws will apply to insurance contracts. In preparation, ASIC has released updated Information Sheets. ASIC has recently engaged with insurers to discuss their progress in the lead up to the commencement of the new protections. ASIC’s supervisory work has focused on identifying potential terms of concern, including:
The updated ASIC information sheets are INFO 210 in relation to protections for consumers and INFO 211 for small businesses, with more information available in ASIC’s media release.
Treasury announced on October 21, 2020 that the Australian Federal Government will review the Australian payments system to ensure it remains fit for purpose and supportive of innovation and competition, as part of the Digital Business Package from the 2020-21 Budget. The regulatory structure of the payments system has remained largely unchanged over the last two decades, with the review designed to ensure business costs are minimised, consumer experience is enhanced and that our regulatory architecture stimulates innovation and competition. The review commenced in October 2020, with the report due to the Treasurer by April 2021. More information is available is available in in Treasury’s terms of reference.
On October 23, 2020, ASIC tabled its 2019-2020 Annual Report to Australian Parliament, recording its performance and activities for the previous financial year. The regulator has noted its shifted priorities due to the continuing impact of the COVID-19 pandemic, with a number of new initiatives including heightened supervision for the fair and orderly operation of our markets, increased support for vulnerable customers and support through the timely completion of capital raisings and urgent transactions.
In response to the recommendations stemming from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, ASIC noted in 2019 to 2020, there was:
Further information about the regulator’s revised priorities, its performance and achievements by sector is available on ASIC’s website.
APRA also released its Annual Report for the 2019 to 2020 financial year, detailing its 2019 regulatory and supervisory agenda and internal organisational changes as part of its 2019-2023 Corporate Plan. The Annual Report provides insights in the rearrangement of the regulator’s priorities and prudential framework due to the impact of COVID-19, with a focus on operational and financial resilience, contingency planning and the suspension of its policy and supervisory agenda, and the insurance of new banking and insurance licences. APRA’s Annual Report provides further details on its statement of performance, management and accountability, statutory reporting requirements and financial statements, with a copy of the Annual Report available here.
APRA has published its weekly data on the temporary COVID-19 superannuation Early Release Scheme (ERS), with data provided at both an industry and fund level. As at October 26, 2020, the ERS has made $34.4 billion in payments, with the average payment of $7,663 being made within 3.3 business days. The fund-level data shows that 100 out of the 175 funds completed more than 90% of payments within the 5 business day guideline specified by APRA, with the 10 funds with the highest number of applications received from the Australian Tax Office making 3 million payments totalling $22.7 billion. Additional commentary and data is available on APRA’s website.
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