Gadens Regulatory Recap – 17 October 2023

This edition of the Gadens’ Regulatory Recap highlights recent developments from ASIC, APRA, ACCC, AFCA, the ATO, Treasury, and the Australian Law Reform Commission, including various enforcement actions taken by the regulators.  

ASIC 

1. ASIC and APRA publish further information on joint administration of FAR:

On 3 October 2023 ASIC and APRA published a Financial Accountability Regime (FAR) information package, which will come into force on 15 March 2024 for Authorised Deposit Taking Institutions and their non-operating holding companies, and 15 March 2025 for insurance entities and licensed NOHCs and superannuation trustees.

The information package contains:

• A Joint Administration Agreement between ASIC and APRA regarding the framework the regulators will jointly use to administer FAR, which addresses: 
• • the roles of each regulator in administering FAR, with ASIC focusing on impacts to market integrity and consumer protection in the financial system and payments system, and APRA focusing on impacts to prudential soundness of regulated entities and financial stability of the overall system; 
  • maintenance of structures to oversee co-administration of FAR, including establishing clear accountability and regulators and consistency of regulatory approach; 
  • establishment of a single reporting portal to alleviate the need for accounting entities to report to each regulator separately; 
  • requirements for regulators to agree with each other before exercising certain powers under the FAR; 
  • cooperation between regulators on investigations and enforcement action; 
  • communication of regulatory and compliance guidance to industry;  
  • information sharing between regulators.
• A joint information paper with guidance to assist authorised deposit-taking institutions (ADIs) regarding the transition from the Banking Executive Accountability Regime (BEAR) to FAR, along with a template accountability statement and guidance. 

ASIC and APRA have foreshadowed releasing further reporting from instructions to assist ADIs with the information to provide to ASIC and APRA, along with the publishing of Regulator Rules and Transitional Rules for ADIs and the Key Functions Descriptions that were the subject of the 20 July 2023 consultation with industry stakeholders. 

For Gadens’ previous comments on the Financial Accountability Regime Bill 2023, see our Regulatory Recap of 19 September 2023. 

2. ASIC re-issues sunsetting legislative instruments in relation to takeovers, compulsory acquisitions and relevant interests:

Seven sunsetting legislative instruments relating to takeovers, compulsory acquisitions and relevant interests which were due to automatically repeal on 1 October 2023 have been remade by ASIC.

The instruments concerned are:

• ASIC Corporations (Changing the Responsible Entity) Instrument 2023/681; 
• ASIC Corporations (Takeover Bids) Instrument 2023/683; 
• ASIC Corporations (Compulsory Acquisitions and Buyouts) Instrument 2023/684; 
• ASIC Corporations (Bidder Giving Substantial Holding Notice) Instrument 2023/685; 
• ASIC Corporations (On-Sale Disclosure Relief for Scrip Bids and Schemes of Arrangement) Instrument 2023/686; 
• ASIC Corporations (Warrants: Relevant Interests and Associations) Instrument 2023/687; and 
• ASIC Corporations (Replacement Bidder’s and Target’s Statements) Instrument 2023/688  

(Collectively, the Sunsetting Instruments). 

ASIC’s consultation procedure unveiled that the Sunsetting Instruments were operating with intended effect and efficiency, with the relevant sunsetting relief contained in those Instruments remaining as is, except for the following amendments:  

• subsection 617(2) has been extended to derivatives, addressing ambiguity surrounding certain performance rights not meeting the definition of ‘securities’ under subsection 92(3), which put them beyond scope of subsection 617(2); 
• enable a bidder to nominate a shorter period for payment of bid consideration than is otherwise required by subsection 620(2); 
• provide that securities acquired on-market by the bidder in reliance on the exemption provided in item 2 of section 611 are included for the purposes of the 75% calculation in subparagraph 661A(1)(b)(ii); 
• remove the requirement to lodge a supplementary bidder’s statement to lodge and dispatch a replacement bidder’s statement; 
• allow the lodgement and dispatch of a replacement target’s statement; and 
• clarify the timing for dispatch of the target’s statement in a market bid where a replacement bidder’s statement is lodged.  

It was unnecessary for ASIC to remake a Class Order (Relevant interests, voting power and exceptions to the general prohibition into the Corporations Act 2001 (Cth)) [CO 13/520] which was consulted on in CP 365 as Schedule 5 of the Treasury Laws Amendment (2023 Law Improvement Package No. 1) Act 2023 (Cth) (assent from Parliament on 20 September 2023) moved matters in [CO 13/520]. 

3. ASIC Enforcement: Over the last fortnight, ASIC has delivered a range of enforcement activities: 

• ASIC announced that various actions were taken against 11 self-managed superannuation fund (SMSF) auditors in the quarter ending 30 September 2023 for activities, including breaches of auditing and assurance standards, independence requirements, and registration conditions. This action included the disqualification of three SMSF auditors, additional conditions imposed on five SMSF auditors, and the cancellation of registration of three SMSF auditors.  

• A former insurance advisor has been banned from providing financial services, controlling an entity carrying on financial services, or performing as an officer in any financial services business for three years after ASIC’s findings that he, amongst other things, misused client funds. 

• ASIC has commenced civil penalty proceedings in the Federal Court against Cigno Australia Pty Ltd, its director, Mark Swanepoel, and BSF Solutions Pty Ltd, and its director, Brenton James Harrison, for allegedly providing credit without either entity holding an Australian Credit Licence. ASIC alleges that the Cigno Australia and BSF ‘No Upfront Charge Loan Model’ provided short-term credit to over 100,000 consumers from July to December 2022, with fees charged to consumers exceeding the limits imposed under the Credit Act – in some instances, more than 600% the total loan amount. ASIC has previously taken action against related parties, Cigno Pty Ltd and BHF Solutions Pty Ltd for operating a lending model that was unlawful without holding an Australian Credit Licence, resulting in declarations and injunctions against the parties. 

• Following failure to produce documents in response to a notice issued by ASIC without reasonable excuse, the Federal Court has ordered Provide Nominees Pty Ltd to produce documents responsive to a notice issued under s33. Justice O’Bryan noted that the evidence ‘gives rise to a strong suspicion that Provide has deliberately refrained from searching for or obtaining from other persons…all documents that are responsive to the Notice.’ 

• Following a referral to the Commonwealth Director of Public Prosecutions, the former CEO of BBY Limited has been charged with aiding, abetting, counselling, or procuring fraud in relation to his involvement in the actions of another former BBY employee who, by deception, obtained additional funding by improperly drawing down on an overdraft account held with St George Bank.  

• Condor Blanco Mines, which was delisted from the ASX in 2018 for failure to pay its annual listing fee, was fined $100,000 for failure to lodge five annual financial reports with ASIC for the 2018 to 2022 financial years.  

• The former director of 24-7 Ice Pty Ltd, who was charged with five counts of falsifying books in early September 2023 (see Gadens’ Regulatory Recap of 5 September 2023), has been convicted after pleading guilty to contraventions of s1307(1) of the Corporations Act 2001 (Cth), having been released without sentence after entering into a recognizance release order of good behaviour for 18 months. 

APRA

4.  APRA Monthly Authorised Deposit-taking Institution Statistics for August 2023 released:

On 29 September 2023, APRA released its Monthly Authorised Deposit-taking Institution Statistics for August 2023. The statistics provide an overview of the operations and transactions of ADI’s in the domestic Australian market, including details on selected assets and liabilities, loans and finance leases and deposits.  

5. APRA publishes further Superannuation Data Transformation Project FAQs:  

On 4 October 2023, APRA published two new and three updated frequently asked questions (FAQs) on the Superannuation Data Transformation (SDT) project. The FAQs help to clarify reporting issues raised by RSE licensees and formulate informal guidance for reporting for RSE licensees. APRA has prefaced that the FAQs ‘do not form part of the law or create enforceable requirement’ until formally incorporated into relevant legislative reporting instruments. However, APRA encourages entities to report in accordance with the FAQ guidance to the extent practicable in the meantime.  

6. APRA publishes second edition of new Quarterly Superannuation Statistics Publication, and Quarterly Superannuation Industry Publication for June 2023: 

On 5 October 2023, APRA released its second edition of the Quarterly Superannuation Product Statistics Publication. The publication details each APRA-regulated superannuation fund product list and contains detailed information in respect of the fees and costs, investment performance, investment strategy and asset allocation for a range of products and investment options.  

Simultaneously, APRA released the June edition of the Quarterly Superannuation Industry Publication, which presents industry-level data on products and member demographics. 

Please click the above links to access either publication.

ACCC 

7. ACCC commences review of its Compliance and Enforcement Policy:  

On 25 September 2023, the ACCC released a survey seeking feedback from consumers and other stakeholders to form part of the 2023 review of its Compliance and Enforcement Policy. The Policy, which sets out the regulator’s compliance and enforcement activities, also lists key factors that will be considered in evaluating whether specific issues will be pursued. 

Specifically, the policy sets out the following enforcement and compliance priorities for 2023 – 2024:  

• consumer, product safety, fair trading, and competition in relation to environmental claims and sustainability; 
• scam detection and support of the implementation of the National Anti-Scam Centre; 
• consumer and fair-trading issues relating to manipulative or deceptive advertising and marketing practices in the digital economy; 
• unfair contract terms in consumer and small business contracts; 
• competition and consumer issues in relation to the pricing and selling of essential services, focusing on energy and telecommunications; 
• competition and pricing issues in gas markets, including compliance with price caps and other obligations in the wholesale gas markets; 
• empowering consumers and improving compliance with consumer guarantees, with a focus on high value goods, including motor vehicles and caravans; 
• competition and consumer issues in global and domestic supply chains, with a focus on transport and logistics; 
• competition and consumer issues relating to digital platforms; 
• promotion of competition and investigation of allegations of anti-competitive conduct in the financial services sector, with a focus on payment services; 
• exclusive arrangements by firms with market power impacting competition; 
• ensuring small businesses receive protections of the competition and consumer laws and relevant industry codes of conduct; and 
• consumer product safety issues for young children, with a focus on compliance, enforcement and education initiatives. 

The Policy also states that the ACCC’s enduring priorities are: 

• cartel conduct; 
• anti-competitive conduct; 
• product safety; 
• consumers experiencing vulnerability or disadvantage; and 
• conduct impacting First Nations Australians. 

The survey closed for submissions on 13 October 2023. 

AFCA  

8. Consultation on AFCA’s Appropriate and Responsible Lending Approaches closed:  

The Australian Financial Complaints Authority (AFCA) invited submissions on two new draft approaches for its key complaint areas:  

• AFCA’s Responsible Lending Approach (with submissions open from 31 July 2023 to 11 September 2023); and 
• AFCA’s Appropriate Lending to Small Business Approach (open from 18 August 2023 to 29 September 2023). 

The consultation process was intended to add further clarity and transparency to AFCA’s process in handling and investigating complaints in these two key areas. Greater visibility over regulatory processes is always welcome, and we expect this consultation process will be a productive exercise for complainants, financial firms and stakeholders. AFCA will consider and respond to the submissions and feedback received.  

ATO 

9.  ATO prompts Businesses to attend to outstanding tax debts:  

The Australian tax office has issued a statement warning businesses to pay or otherwise engage with their outstanding tax debts or they will risk having their debts disclosed to credit reporting agencies making the debts visible to credit rating checks.  

As of July 2023, the ATO has issued more than 22,000 Notices of intent to disclose business tax debts (Notices of Intent) upon business with a tax debt of more than $100,000 that is overdue by more than 90 days. Recipients of a Notice of Intent that are unable to meet their obligations are urged to contact the ATO or their tax professional for support. 

Speaking at the Tax Institute’s tax Summit on 7 September 2023, ATO Deputy Commissioner Vivek Chaudhary stated that the ATO’s focus on stimulus payments and tax assistance that prevailed during the pandemic is shifting back to a debt collection and firmer action against companies that are not paying their debts on time. 

The ATO has said it anticipates 50,000 Notices of Intent will be issued in the 2023–24 financial year. The ATO wants to work with businesses to assist them in getting on top of their debts, and is encouraging businesses to contact them as soon as possible, including accessing ato.gov.au/debt for more information about what affected taxpayers can do if they are unable to make payment to the ATO on time.

10. Upcoming ATO updates: The ATO has foreshadowed that it is developing ruling guidance on the following tax issues which relate to the Financial Services sector:

• Financial advice fees: The Commissioner will provide a preliminary view on the deductibility of financial advice fees under sections 8-1 or 25-5 of the Income Tax Assessment Act 1997 for individuals that are not carrying on a business. The update is expected in November.  

• Crypto guidance: The ATO has foreshadowed a web update to provide clearer tax compliance guidance on issues relating to the treatment of crypto assets. The update is expected in November.  

• Corporate collective investment vehicles: The Commissioner will provide a draft law companion ruling on the operation and introduction of the Corporate Collective Investment Vehicle regime introduced in July 2022. The update is expected this month. 

• Taxation privileges and immunities of international organisations and persons connected with them: The ATO has foreshadowed that it will provide a final ruling in respect of TR 92/14 Income tax: taxation privileges and immunities of prescribed International Organisations and their staff following the High Court decisions in Macoun v Commissioner of Taxation [2015] HCA 44 and Commissioner of Taxation v Jayasinghe [2017] HCA 26 which relate to exemptions for taxation for persons who hold positions in international organisations as defined in subparagraph 6(1)(d)(i) of the International Organisations (Privileges and Immunities) Act 1963 (Cth).  

• Division 7A – undue hardship – corporate trustees: The Commissioner will provide a draft determination on whether a corporate trustee could suffer undue hardship on payment of a debt owed to a company for the purposes of subsection 109G(4) of the Income Tax Assessment Act 1936 (Cth). 

For more information, please access the following link.  

11. ATO released key insights from large and multinational business programs: On 28 September 2023, the ATO released some high-level insights learnt through its interactions with large and multinational business programs and documented in their reports in relation to:

• the Top 100 program;  
• the Top 1,000 program;  
• the Reportable Tax Position (RTP) schedule Category C disclosures; and  
• the Public and multinational business advice and guidance program.

(Collectively, the Reports).  

The Reports demonstrate how the ATO continues to ensure that large and multinational businesses pay the correct tax amount. By working closely with these industry players, it enables the ATO to readily resolve issues as they emerge, and to ultimately provide more guidance and support to the taxpayer.  

The findings: 

• the Top 100 program reveal that the ATO has seen, and continues to see a reduction in high-risk transactions being entered into and an increase in the importance of tax compliance in the corporate governance structure;  
• The Reportable Tax Position (RTP) schedule Category C disclosures report has revealed to the ATO that large public and multinational business lodgements and disclosures have ostensibly increased, with low-risk arrangements increasing and high-risk, or arrangements of concern (including tax avoidance schemes), have declined. The ATO further notes strong compliance by large business in completing the RTP; and  
• The Public and multinational business advice and guidance program report has otherwise revealed to the ATO that this particular program has played a key role in providing tax certainty across the public and multinational business market, with most applicants to the program being tax advisors representing taxpayers. The ATO has said that “It illustrates that the nature and amounts of advice requested reflects market activity, as well as changes to the law.” 

For more information, please access the following link. 

Treasury

12.  Treasury closes consultation on expansion of Consumer Data Right Rules to non-bank lending sector: 

On 6 October 2023, Treasury closed its consultation on the exposure draft amendments to the Competition and Consumer (Consumer Data Right) Amendment Rules (No.2) 2023 (CDR Rules), explanatory materials and a draft Privacy Impact Assessment (collectively, the Amending Rules), which can be accessed here.  

The Amending Rules seek to expand the CDR to the non‑bank lenders sector, with the view to enhance consumer and business engagement and improve financial outcomes with both banks and non-bank lenders for individuals and businesses. The Amending Rules impact Schedule 3 of the CDR Rules, which will apply the following elements to the non-bank lending sector:  

• eligibility requirements for consumers seeking to make requests for CDR data;  
• provisions specifying in-scope products and data sets that may, or must be provided on request;  
• requirements for internal and external dispute resolution.

Additionally, the Amending Rules make minor edits to the obligations of authorised deposit taking institutions (ADIs) as existing data holders under Schedule 3, including [1]:

• introducing data sharing for ‘buy now, pay later’ products (subject to a deferral timetable to allow affected ADIs to make the necessary IT enhancements);  
• excluding from the definition of ‘account data’ information relating to financial hardship and repayment history;  
• excluding from the definitions of ‘voluntary consumer data’ and ‘required consumer data’ consumer data relating to debts bought by debt buyers or debt collectors; 
• for entities that become ADIs post commencement of the Amending Rules, deferring obligations to permit CDR consumers timely access to product data while allowing new ADIs to complete the IT uplift required to facilitate banking data requests. 

The Amending Rules will commence the day following the date they are registered on the Federal Register of Legislation.

13. Treasury set to review the managed investment scheme regulatory framework:  

In the October 2022‑23 Budget, the Federal Government announced that Treasury would be reviewing the regulatory framework for managed investment schemes. The announcement postdates the consultation paper on the topic, which was released on 4 August 2023. Submissions closed on 29 September 2023. The aim of this consultation was to assess whether the current framework is ‘fit‑for‑purpose, to identify potential gaps, and to consider what enhancements could be made to reduce undue financial risk for investors’.  

The consultation sought submissions on a number of issues, including whether:  

• the wholesale client thresholds continue to be appropriate; 
• existing governance and compliance frameworks promote the effective operation of schemes; 
• the regulation of schemes with real property remains appropriate; and 
• Investor rights are adequately protected. 

The Federal Government foreshadows releasing its findings from the consultation by early 2024. 

14. Treasury issues consultation paper for regulation of digital asset platforms:

On 16 October 2023, Treasury released its consultation paper in respect of introducing a regulatory framework for crypto assets. The regulations are intended to address consumer harms, whilst supporting innovation in this sector, and would leverage the AFSL framework to bring digital asset platforms in line with traditional AFSL regulations. This is a crucial and welcome step for Australian crypto reform. The government is seeking submissions from interested parties on the proposed framework, with specific consultation questions outlined in the consultation paper. Submissions close on 1 December 2023. Gadens Regulatory Team will be reviewing this space, and will publish a more comprehensive article in due course. Watch this space for further updates from us.  

ALRC 

15. ALRC publishes 12th Background Paper (FSL12) to proposed reforms intended to simplify the legislative framework for Corporations and Financial Services: 

The Australian Law Reform Commission (ALRC) has published its 12th edition of the background paper FSL12 (Background Paper), which summarises submissions received in response to Interim Report C, as part of its review of reforming the legislative framework for Corporations and Financial Services (Inquiry). This publication provides a high-level snapshot of the topics of relevance of the Inquiry, and the areas of research and development which will support the ALRC’s final recommendations.  

The ALRC reported it received 17 submissions from a range of stakeholders, including industry participants, industry representatives, consumer representatives, academics, and legal practitioners in response to Interim Report C (published 22 June 2023).  

The ALRC must publish the Final Report on the Inquiry by 30 November 2023. A copy of the Background Paper can be accessed here.  

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Authored by: 

Michael Kenny, Partner
Matthew Bode, Partner
Kelly Griffiths, Partner
Sinead Lynch, Partner
Daniel Maroske, Partner
Kate Mills, Partner
Caroline Ord, Partner 
Anna Fanelli, Senior Associate
Elizabeth Ziegler, Senior Associate 
Philip O’Brien, Senior Associate
Rebecca Di Rago, Senior Associate
Patrick Simon, Associate
Zira Norman, Senior Associate
Declan Melia, Lawyer  

[1] Exposure Draft Explanatory Materials to Competition and Consumer (Consumer Data Right) Amendment Rules (No. 2) 2023, p. 2.