ASIC Announces Plans to Update Several Key RGs in 2025
On 25 November 2024, the Australian Securities and Investments Commission (ASIC) announced plans to update several key Regulatory Guides (RGs) in 2025. This initiative aims to ensure that these guides remain clear, effective, current, and appropriate, aligning with ASIC’s commitment to enhancing regulatory efficiency and reducing complexity.
Planned Updates
ASIC intends to consult with stakeholders to revise the following RGs, considering recent law reforms and insights from case law:
- RG 53: The use of past performance in promotional material
- RG 168: Disclosure: Product Disclosure Statements (and other disclosure obligations)
- RG 181: Licensing: Managing conflicts of interest
- RG 183: Approval of financial services codes of conduct
- RG 234: Advertising financial products and services (including credit): Good practice guidance
For detailed information on the upcoming releases and their timelines, stakeholders can refer to ASIC’s Regulatory Developments Timetable.
ASIC values feedback from stakeholders, recognising it as fundamental to the development and maintenance of effective regulatory guidance. Stakeholders are encouraged to provide input to assist in refining these RGs.
This proactive approach by ASIC reflects its dedication to maintaining a transparent and efficient regulatory environment, ensuring that guidance documents effectively support regulated entities in understanding and complying with the law.
ASIC Acknowledges Release of Pivotal Reports by IOSCO
On 28 November 2024, the ASIC acknowledged the release of several pivotal reports by the International Organisation of Securities Commissions (IOSCO), highlighting significant challenges and opportunities for global market regulators.
ASIC played a crucial role in formulating these consultation reports, particularly through its leadership of IOSCO’s Committee on Regulation of Market Intermediaries (Committee 3).
Key Consultation Reports:
- Pre-Hedging: This report examines potential conduct and market integrity issues related to pre-hedging, offering a clear definition and recommendations for regulators to identify acceptable practices and effectively manage associated risks.
- Enhancing Retail Investor Online Safety: IOSCO released three reports aimed at protecting retail investors from emerging global risks, addressing online fraud, promoting safe investing, and enhancing global cooperation. These reports focus on:
Following IOSCO’s final reports, ASIC plans to assess how to implement the recommendations within Australia, potentially updating its existing guidance to align with international standards.
This initiative underscores ASIC’s commitment to maintaining market integrity and enhancing investor protection in an evolving global financial landscape.
ASIC Cancels AFSL of RPD Group Advice Pty Ltd
On 29 November 2024, the ASIC announced the cancellation of the Australian Financial Services (AFS) licence of RPD Group Advice Pty Ltd. This action followed a compensation payment of $62,421 made by the Compensation Scheme of Last Resort (CSLR) to a consumer, after RPD Group failed to comply with a determination by the Australian Financial Complaints Authority (AFCA).
Background:
- On 12 July 2024, AFCA issued a determination against RPD Group, which the firm did not fulfill.
- Subsequently, on 13 November 2024, the CSLR compensated the affected consumer and notified ASIC.
- In accordance with regulatory requirements, ASIC cancelled RPD Group’s AFS licence on 21 November 2024.
Under current legislation, when the CSLR compensates a consumer due to a firm’s non-compliance with an AFCA determination, ASIC is mandated to revoke the firm’s AFS or credit licence. This process is automatic and not subject to discretion or review.
ASIC releases Consultation Paper to Clarify definitions of Digital Assets
On 4 December 2024, the ASIC released Consultation Paper 381 (CP 381), proposing updates to Information Sheet 225 (INFO 225) to clarify the application of existing financial product definitions to digital assets and related services.
Key Proposals:
- Practical Examples: Inclusion of 13 examples illustrating how current financial product definitions apply to various digital assets and services.
- Licensing Guidance: Clarification on the application of the Australian Financial Services (AFS) licensing regime to digital asset businesses, ensuring consistent regulatory standards across traditional and digital financial products.
- Transitional Arrangements: Consideration of a class ‘no action’ position for digital asset businesses actively seeking or modifying an AFS licence, providing temporary relief during the application process.
Commissioner Alan Kirkland emphasised the importance of balancing innovation with consumer protection, stating that a well-regulated financial system enhances consumer confidence, market integrity, and fosters competition and innovation.
ASIC encourages stakeholders to participate in the consultation process, recognizing the need for industry adaptation to the updated guidance. Feedback is requested by 28 February 2025, with the final version of INFO 225 expected by mid-2025.
Entities involved in digital assets should assess their operations against the proposed guidance to ensure compliance with financial services laws. The updates aim to provide clarity, promoting responsible innovation while safeguarding consumer interests.
This initiative reflects ASIC’s commitment to adapting regulatory frameworks to the evolving digital asset landscape, ensuring that consumer protection and market integrity are upheld.
ASIC Suspends AFSL of Edisons Global
On 4 December 2024, the ASIC announced the suspension of Edisons Global Pty Ltd’s Australian Financial Services (AFS) licence for six months, effective from 31 October 2024 to 30 May 2025.
Reasons for Suspension:
Edisons Global, a fund manager operating a managed investment scheme for wholesale clients, failed to meet key compliance obligations:
- Non-Lodgement of Financial Documents: Since being granted its AFS licence in 2021, Edisons did not submit its industry funding metrics, annual financial statements, auditor reports, and audit opinions by the due dates for the financial years ending 30 June 2022 and 30 June 2023.
While the suspension is in effect, Edisons Global is permitted to:
- Wind Down Operations: Continue providing financial services necessary for, or incidental to, the winding down of any managed investment scheme it operates for wholesale clients.
- Appoint New Trustees: Assign new trustees to any such schemes or manage their daily operations.
Edisons is prohibited from issuing interests in any managed investment scheme to new members during the suspension period.
ASIC Publishes findings from Recent Surveillance
On 4 December 2024, the ASIC published findings from its recent surveillance of the reportable situations regime, highlighting areas where financial services and credit licensees can enhance compliance.
Key Findings:
- Delayed Breach Identification: Licensees exhibited significant delays in identifying and reporting breaches, primarily due to prolonged internal processes.
- Deficient Incident Management: Many licensees lacked effective systems for incident detection, escalation, and documentation, impeding timely breach recognition.
- Inadequate Compliance Monitoring: Gaps were prevalent in monitoring adherence to the reportable situations regime, leading to inconsistent reporting practices.
- Consumer Impact: Delays in breach identification and remediation adversely affected consumers, prolonging the resolution of issues.
Recommendations for Licensees:
- Enhance Incident Detection: Implement robust systems to promptly identify and assess incidents that may constitute breaches.
- Streamline Reporting Processes: Develop clear protocols to ensure swift escalation and reporting of breaches to ASIC.
- Strengthen Compliance Monitoring: Regularly review and update compliance frameworks to align with regulatory requirements.
- Prioritise Consumer Remediation: Act promptly to rectify breaches and compensate affected consumers to mitigate adverse impacts.
ASIC emphasises the importance of a proactive compliance culture and expects all licensees to review and improve their breach reporting mechanisms accordingly.
ASIC Reaffirms Commitment to Enhancing Reportable Situations Regime
On 4 December 2024, the ASIC reaffirmed its commitment to enhancing the reportable situations regime, a pivotal element of Australia’s financial services and credit regulatory frameworks. ASIC emphasises that all licensees, irrespective of size, must establish robust systems to promptly detect and report non-compliance.
Recent Developments:
- Legal Proceedings: ASIC initiated legal action against United Super Pty Ltd, the trustee of Cbus, citing systemic claims handling failures and delays in lodging reportable situations within the mandated 30-day period.
- Commissioner’s Statement: Commissioner Kate O’Rourke highlighted that adherence to the reportable situations regime compels licensees to swiftly identify, rectify, and report issues, thereby elevating industry standards and enhancing consumer outcomes.
ASIC’s Ongoing Initiatives:
- Stakeholder Consultation: ASIC plans to engage stakeholders on options for detailed reporting to gain deeper insights, aiming to publish the fourth annual report on reportable situations data in the third quarter of 2025.
- Balancing Reporting and Burden: Efforts are underway to ensure ASIC receives reports with high intelligence value while mitigating the reporting burden on the industry.
- Sector-Specific Monitoring: ASIC will conduct sector-by-sector reviews to enhance compliance with the regime and will pursue enforcement actions when necessary.
ASIC has released insights, key questions, and best practice examples to assist licensees in meeting their obligations under the regime. These resources are based on a recent review of licensees who had minimal or no reportable situations lodged, revealing areas for improvement in incident identification and compliance management.
Background:
- Annual Reporting: ASIC is mandated to report annually on data provided under the reportable situations regime, with the third report released on 31 October 2024.
- Regime Reforms: Since the 2021 reforms, ASIC has updated guidance, provided reporting relief, and introduced a machine-to-machine interface for efficient report lodgement.
ASIC’s ongoing efforts underscore its dedication to ensuring the reportable situations regime effectively upholds industry standards and protects consumer interests.
ASIC Release Report – Cause for Complaint
On 5 December 2024, the ASIC released Report 802: Cause for complaint: Complaints handling in general insurance, revealing significant deficiencies in how general insurers manage customer complaints. The review assessed 11 general insurers, representing approximately 86% of the market by premium, and identified critical areas needing improvement.
Key Findings:
- Unidentified Complaints: Insurers failed to recognize one in six customer complaints, effectively denying these customers access to the Internal Dispute Resolution (IDR) process and potential escalation to the Australian Financial Complaints Authority (AFCA).
- Systemic Issues Overlooked: Insurers reported only 85 systemic issues from over 1.4 million complaints, whereas AFCA identified 11 systemic issues from approximately 16,000 external dispute resolution complaints. Notably, nearly half of the insurers did not identify any systemic issues.
- Immature IDR Systems: The review found that insurers had underdeveloped systems and processes for handling and reporting complaints, leading to inconsistent communication practices and non-compliance with mandatory IDR obligations.
Commissioner Alan Kirkland expressed disappointment, emphasising that consumers expect fair, timely, and effective complaint handling, especially during distressing events like floods. He urged insurers to cultivate a positive complaints management culture that learns from customer feedback to prevent recurring issues.
ASIC expects all insurers to address the findings by enhancing their complaints handling frameworks. The insurers involved in the review are required to develop action plans detailing how they will rectify the identified shortcomings to better support their customers.
For a comprehensive understanding, refer to ASIC’s official media release and Report 802.
ASIC Releases Updated RG 217 – Duty to Prevent Insolvent Trading (Guide for Directors)
On 6 December 2024, the ASIC released an updated version of Regulatory Guide 217 (RG 217): Duty to prevent insolvent trading: Guide for directors. This revision aims to assist directors and their professional advisers in understanding and fulfilling their obligations to prevent insolvent trading, incorporating new guidance on the ‘safe harbour’ provisions.
Key Updates:
- Simplified Guidance: ASIC has streamlined the content to enhance clarity and usability for directors, particularly those overseeing small-to-medium enterprises (SMEs).
- Professional Advice Clarity: The guide now offers detailed insights on when and how directors should seek professional advice to ensure compliance with their duties.
- Enhanced ‘Safe Harbour’ Guidance: Additional practical examples have been included to elucidate the application of safe harbour provisions, aiding directors in navigating complex financial situations.
These updates follow a consultation process initiated in September 2023, where ASIC sought feedback from registered liquidators, professional bodies, and other stakeholders. The industry responses highlighted the need for simplified guidance, clearer advice protocols, and improved support for SME directors.
ASIC Releases Results of 27th Financial Advisers Exam
On 6 December 2024, the ASIC announced the results of the 27th Financial Advisers Exam, conducted in November 2024. The exam, administered by the Australian Council for Educational Research (ACER), maintains rigorous standards to ensure consistent assessment across all candidates.
Key Outcomes:
- Participation: 289 candidates sat for the exam.
- Success Rate: 77% (225 candidates) passed the exam.
- First-Time Candidates: 71% (207 candidates) were first-time examinees.
Unsuccessful candidates will receive feedback from ACER to help them understand areas needing improvement.
ASIC Commissioner Delivers Keynote Address – Australasian Consumer Law Roundtable
On 6 December 2024, ASIC Commissioner Alan Kirkland delivered a keynote address at the Australasian Consumer Law Roundtable in Melbourne, advocating for the inclusion of financial services in the proposed Unfair Trading Practices prohibition. He emphasized that financial products’ inherent complexity and the significant power imbalance between consumers and financial firms make the sector particularly susceptible to unfair practices. Kirkland argued that excluding financial services from these reforms would leave consumers vulnerable and called for an economy-wide approach to consumer protection.
ASIC Bans Financial Advisor for Unlicensed Activities
On 6 December 2024, the ASIC banned former South Australian financial adviser Bruce Stuart Davis from participating in financial services for seven years. This prohibition encompasses providing financial services, controlling a financial services business, and performing any related functions.
Background:
- Role: Davis served as the sole director, responsible manager, and financial adviser at Wise Investment Advisers Pty Ltd (WIA), an Australian Financial Services (AFS) licensee.
ASIC’s Findings:
- Unlicensed Activities: Davis provided financial advice and dealing services in derivatives without the necessary licensing.
- Breach of Client Trust: He failed to act in his clients’ best interests, offered inappropriate advice, and neglected to provide required statements of advice.
- Misleading Representations: Davis made deceptive claims about potential high returns from his recommendations and trading strategies.
- Client Losses: His actions resulted in significant financial losses for his clients.
ASIC noted Davis’s refusal to acknowledge or accept responsibility for these contraventions and the consequent client losses, questioning his fitness to be involved in financial services.
