Welcome to the latest issue of the KHQ Super Alert. This week, APRA issued a letter to all RSE licensees relating to its increased monitoring of fund expenditure, it also released a finalised version of SPG 114 on operational risk financial requirements, ASIC published its 2023-24 annual report, a former CEO of a cryptocurrency trading service has been charged with fraud and a revised regime on OTC derivative transaction reporting came into force.
APRA – Consultation materials from SPS 114 review released
On 24 October 2024, APRA released various response materials relating to its ‘consultation on proposed amendments to the prudential requirements and guidance relating to the operational risk financial requirement (ORFR)’. As referred to in our Super Alert of 18 October 2024, a revised version of SPS 114 Operational Risk Financial Requirement was registered on 17 October 2024, which will come into effect on 1 July 2025.
APRA has now also released a finalised version of SPG 114 and its response paper to the industry submissions.
Click here for details.
ASIC – New and amended guidance for removal of auditors
On 24 October 2024, ASIC released an updated version of Regulatory Guide 26 Resignation, removal and replacement of auditors, and updated or new information sheets also relating to auditors. According to ASIC, the updates ‘reflect expanded obligations applying in relation to registrable superannuation entities’ as a result of the amendments to Chapter 2M of the Corporations Act 2001 (Cth) last year.
New Information Sheet 288 Resignation and removal of auditors of registrable superannuation entities has been published specifically to provide further guidance to superannuation trustees.
Click here for details.
Legislation – Amendments to FSG disclosure rules
On 24 October 2024, the ASIC Corporations (Amendment) Instrument 2024/809 was registered on the Federal Register of Legislation. According to the Explanatory Statement, the purpose of the instrument is to correct one anomaly which arose out of the first tranche of the Quality of Advice Review reforms as part of the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act 2024 (Cth).
The amendments introduced by this Act allow licensees to ‘make available website disclosure information’ to a client rather than giving a Financial Services Guide. However, where the advice provider ‘wanted to deal in a financial product for the purpose of implementing the advice they provided to the client’, then an FSG was still required. This instrument enables website disclosure to be made in these circumstances to ensure the law is consistent with the policy intent of the reforms.
Click here for details.
ASIC – Speech in relation to ASIC priorities in financial services
On 24 October 2024, ASIC published a speech delivered by one of its commissioners, Kate O’Rourke. In the speech, Ms O’Rourke outlined the current key priorities for ASIC including:
- ‘[i]mproving consumer outcomes in relation to financial products and services…[ASIC] will continue to focus on protecting consumers from poor conduct and harm from products’; and
- ‘advancing digital and data safety including addressing technology enabled misconduct like scams – and monitoring the use of artificial intelligence’.
Click here for details.
ASIC – AFSL cancellation for financial services business
On 24 October 2024, ASIC issued a media release announcing that it has cancelled the AFS licence of a Queensland-based financial services entity (which is in liquidation). The entity recommended that clients invest in two investment funds which invested in ‘highly speculative’ investments and whose directors are alleged to have engaged in prohibited conduct. ASIC is also taking enforcement action in relation to the two investment funds.
Click here for details.
ASIC – Financial advisers webinar details
On 23 October 2024, ASIC announced that it will host a webinar on 13 November 2024 ‘to provide practical guidance to Australian financial services (AFS) licensees and financial advisers (relevant providers) to assist industry with the application of the qualifications standard’. ASIC has explained that ‘31 December 2025 marks the end of the transition period for existing providers to meet the qualifications standard. If they fail to meet the standard by this date, they will not be able to continue providing personal advice to retail clients in relation to relevant financial products from 1 January 2026’. The webinar is open to anyone to attend.
Click here for details.
Government – Expansion of AFCA remit for scams prevention
On 23 October 2023, the Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services, issued a media release in relation to a proposal to provide ‘$14.7 million over two years to the Australian Financial Complaints Authority (AFCA) to establish a clear single pathway for scam victims to seek compensation’. This will be done by extending AFCA’s ‘scams prevention’ remit to capture ‘digital platforms providing social media, paid search advertising and direct messaging’.
The Assistant Treasurer explained that ‘social media companies have no internal or external dispute resolution mechanism and redress is close to impossible’ so expanding AFCA’s remit to include these companies will mean that ‘if a person is the target of a scam on social media and loses money from their bank account, both the bank and the social media platform could be liable if they failed to put adequate protections in place’.
Click here for details.
APRA – Increased fund level expenditure supervision
On 22 October 2024, APRA issued a letter to all RSE licensees setting out ‘APRA’s planned activity in this area over the next 12 months’, particularly in relation to fund expenditure.
APRA’s intention is to ‘initially focus its supervisory efforts on…[d]iscretionary expenditure categories such as travel, entertainment and conferences…[r]elative and absolute size outliers, including consideration of impact to members…[and] [p]articular types of payees and payments where benefit to members is not immediately apparent’.
Click here for details.
ASIC – Annual report for 2023-24
On 22 October 2024, ASIC released its annual report for the 2023/24 financial year. The report sets out the outcomes achieved by the ‘program of transformation’ which commenced three years ago.
Notable achievements include:
- ‘regulatory and enforcement firsts’ (such as civil penalties for greenwashing actions);
- ‘strong compliance and enforcement outcomes’ (more investigations were commenced compared to the previous financial year); and
- ‘consumer protection’ (taking down investment scam and phishing websites).
Click here for details.
ASIC – Ex CEO of crypto exchange charged with fraud
On 21 October 2024, the ex-CEO of a financial services company appeared in the Magistrates Court at Ipswich charged with one count of fraud contrary to section 408C of the Criminal Code 1899 (Qld). ASIC alleges that a customer of the company’s digital asset exchange platform ‘paid $2.2 million … for Bitcoin and never received any cryptocurrency in exchange’. The matter has been adjourned until the end of the year.
Click here for details.
ASIC – Proposed updates to RG 51 and RG 108
On 21 October 2024, ASIC launched a consultation on the proposed updates to Regulatory Guide 51 Applications for relief (RG 51) and Regulatory Guide 108 No-action letters (RG 108). ASIC advises that it is ‘updating RG 51 and RG 108 to reflect our current regulatory approaches to both applications for relief and no-action letters, to incorporate relevant additional guidance and amend outdated references’.
The consultation period closes on 18 November 2024.
Click here for details.
ASIC – Changes to OTC derivative transaction reporting
On 21 October 2024, ASIC confirmed that the ASIC Derivative Transaction Rules (Reporting) 2024 (2024 Reporting Rules) have now replaced the ASIC Derivative Transaction Rules (Reporting) 2022. According to ASIC, ‘the 2024 Reporting Rules make changes to:
- align with international reporting standards
- consolidate transitional provisions and exemptions, and
- ensure reporting requirements are fit for purpose’.
Click here for details.
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