Allens

Regulatory map

We are entering a period where financial institutions are facing unprecedented changes in their regulatory landscape. The Federal Government has announced significant reform proposals, which reflects the increasing scrutiny of the financial services sector. Managing regulatory compliance will become of greater importance going forward, which will affect almost all areas of banking.

Partner Michelle Levy (view CV), Senior Associate Julia Clemente and Lawyer Jamil Diu summarise the expected developments below, which will continue to be monitored and updated.

January 2018

Life insurance change to exemption against conflicted remuneration ban – commenced 1 January 2018

Legislation has been passed that limits the conflicted remuneration that can be paid to brokers in relation to certain life insurance products. 'Conflicted remuneration' refers to a benefit that could reasonably be expected to influence which financial products or financial product advice is given to retail clients.

We consider this development in our Unravelled publication.

Amendment of AMF/CTF Rules – amendments registered on 11 January 2018

The Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2018 (No 1) was registered on 11 January 2018. These amendments aim to expand the exceptions applied to cases involving beneficial ownership and where a reporting entity is related to its customer. For example, the beneficial ownership exception has now been expanded to include majority-owned subsidiaries of foreign publicly-listed companies that are already subject to disclosure requirements.

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February 2018

Design and Distribution Obligations and Product Intervention Power Proposals – submissions closed 9 February 2018

In response to the Financial System Inquiry's recommendations to introduce a) design and distribution obligations for financial products to ensure they are targeted at the right people; and b) a temporary product intervention power for ASIC when there is a risk of consumer detriment, the Department of Treasury released the Design and Distribution Obligations and Product Intervention Power Proposals on 13 December 2016. On 21 December 2017, the Treasury released an exposure draft of the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2017. Proposed amendments include: imposing design and distribution obligations for financial products; and providing a temporary product intervention power for ASIC. Submissions from interested parties to the exposure draft closed on 9 February 2018.

Productivity Commission – review into competition in the Australian financial system – draft report published on 9 February 2018

Following the 2014 Inquiry into the Financial System (otherwise known as the Murray Inquiry), one recommendation was that the state of competition within the financial system should be reviewed once every three years. This recommendation followed concern that, the high concentration in certain areas of the financial system, such as retail banking and general insurance, would curtail the benefits of competition in the future. As a result, the Productivity Commission was tasked by the Treasurer to investigate competition in the financial system on 8 May 2017. On 9 February 2018, the draft report was published which provided the Commission's proposed recommendations. The final report is expected to be handed down to the Federal Government by 29 July 2018.

New Payments Platform – launched on 13 February 2018

Officially launched on 13 February 2018, the New Payments Platform (NPP) is an industry-led and funded initiative of open access infrastructure for Australian payments. APIs will connect to the NPP, to process fast, data-rich payments for their account holders at any time (including public holidays and outside business hours). For example, consumers may now transfer money instantly between accounts at different financial institutions.

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March 2018

Asia Region Funds Passport – consultation period for exposure draft ended on 5 March 2018

Following an initial consultation in December 2017, the Government proposed a revised exposure draft for the Corporations Amendment (Asia Region Funds Passport) Bill 2018: Chapter 8A on 19 February 2018. The exposure draft proposes to amend the Asia Region Funds Passport regime by: making consequential amendments which provide parity between passport funds and other managed investment products; provisions facilitating the deregistration of Australian and foreign passport funds; and consequential amendments extending consumer protection provisions to notified foreign passport fund products. Consultation for the exposure draft closed on 5 March 2018.

Financial Services Legislation Amendment (Crisis Resolution Powers and Other Measures) Act – commenced 5 March 2018

In response to the Financial System Inquiry's recommendations, the Federal Government announced reforms providing more power to regulators in the event that a prudentially regulated financial entity failed. The Financial Services Legislation Amendment (Crisis Resolution Powers and Other Measures) Act enacts these proposals by strengthening APRA's powers to facilitate the orderly resolution of an ADI or insurer. These include, for example, enhancements to APRA's powers to wind-up regulated entities and its directions powers. The Act came into effect on 5 March 2018.

Treasury Laws Amendment (Banking Measures No. 1) Act – non-ADI lending rules and Banking Act 1959 objects provision commenced 5 March 2018

The Treasury Laws Amendment (Banking Measures No. 1 ) Act seek to amend existing laws in relation to banking, insurance, credit, registrable corporations and financial system regulation. On 5 March 2018, the Act received Royal Assent and the following provisions commenced: the provision of additional powers for APRA to make regulations in respect of non-ADI lending activities; requirement for non-ADI lenders to register with, and provide data, to APRA; and insertion of an Objects Provision in the Banking Act 1959 to modernise the Banking Act. The other amendments relating to Credit card related reforms will commence either on 1 July 2018 or 1 January 2019 depending on the provision (see below).

Financial Services Royal Commission – first round of public hearings commenced 13 March 2018

On 14 December 2017, Letters Patent were issued to the Honourable Kenneth Hayne AC QC for the establishment of a Royal Commission into alleged misconduct into the banking, superannuation and financial services industry (Terms of Reference for the Commission can be found here). The first round of public hearings was held from 13 March 2018 to 23 March 2018 and focused on consumer lending practices (including treatment of consumers in relation to credit products and arrangements and practices of banking and financial service providers and their intermediaries).

Enhancing whistleblower protections – Economics Legislation Committee Report tabled 22 March 2018

The Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 was introduced to the Senate on 7 December 2017. On 8 February 2018, the Senate referred the Bill to the Economics Legislation Committee for inquiry. The report by the Committee was tabled on 22 March 2018. Importantly, the Committee recommended that the Bill be passed and noted the Australian Competition and Consumer's view that passing the Bill would not preclude further development of whistle-blower protections. The Bill is currently before the Senate.

Foreign bribery – report released on 28 March 2018

The Senate Economic Reference Committee commenced an inquiry into, among other things, 'the measures governing the activities of Australian corporations, entities, organisations, individuals, government and related parties with respect to foreign bribery'. The final report was released on 28 March 2018 and contains 22 recommendations. The recommendations aim to improve Australia' anti-foreign bribery compliance and enforcement response by strengthening its legal framework against foreign bribery. Relevantly, the report recommends that the foreign bribery offence be amended, and a failure to prevent foreign bribery offence and a deferred prosecution agreement scheme be introduced. It also recommends that the facilitation payments defence be abolished.

Strengthening superannuation member outcomes – consultation closed 29 March 2018

On 13 December 2017, APRA published its Discussion Paper on Strengthening Superannuation Member Outcomes alongside proposed amendments to the existing: Prudential Standards SPS 220 (Risk Management) and SPS 225 (Outcomes Assessment) and Prudential Practice Guides SPG 221 (Strategic and Business Planning) and SPG 225 (Outcomes Assessment). The proposed changes intend to improve accountability by RSE Licensees such as imposing more focus on expenses and requiring them to have a business plan. Allens produced a Client Update on this here.

Rationalisation of life insurance and managed investment scheme legacy products – report tabled on 28 March 2018

In response to the Financial Services Inquiry recommendation that there should be a mechanism to facilitate the rationalisation of legacy products in the life insurance industry, the Senate referred an inquiry into the life insurance industry to the Parliamentary Joint Committee on Corporations and Financial Services. Submissions closed on 18 November 2016 and the Senate was due to release a report on 31 October 2017 but this was extended to 7 December 2017 and then further extended to 31 March 2018. The report was tabled on 28 March 2018. APRA has expressed its support in relation to the Financial Services Inquiry recommendation. We considered the proposed reform in further details in our Unravelled publication.

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April 2018

Anti-Money Laundering and Counter-Terrorism Financing Act 2017 – commenced 3 April 2018

The Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017 was introduced to Parliament on 17 August 2017 and follows the Federal Government's recommendations made in the report on the statutory review of the Anti-Money Laundering/Counter-Terrorism Financing (AML/CTF) regime released by the Attorney-General's Department in April 2016.

The Bill was passed by both Houses on 7 December 2017 and received Royal Assent on 13 December 2017. The Act implements, among other things, the strengthening of AUSTRAC's investigation and enforcement powers, the regulation of digital currency exchange providers, such as Bitcoin, and the expansion of AUSTRAC's rule-making powers across a number of areas. The Act commenced on 3 April 2018.

ASIC Consultation Paper 298 – oversight of AFCA – consultation ended 6 April 2018

The ASIC released Consultation Paper 298 on 5 March 2018 relating to its oversight of AFCA. The Consultation Paper seeks feedback relating to financial firms and whether they require transitional relief from external dispute resolution (EDR) reporting obligations in the lead-up to the establishment of AFCA. In addition, the ASIC sets out its approach to reporting requirements applicable to AFCA, role of AFCA's independent assessor, and the EDR reporting obligations. Submissions from the public closed on 6 April 2018.

Financial Services Royal Commission – second round of hearings held from 16 April 2018

On 14 December 2017, Letters Patent were issued to the Honourable Kenneth Hayne AC QC for the establishment of a Royal Commission into alleged misconduct into the banking, superannuation and financial services industry (terms of Reference for the Commission can be found here). The second round of public hearings was held from 16 April to 27 April 2018 focused on the financial planning and wealth management industry.

ASIC Enforcement Review Taskforce – Federal Government response published on 16 April 2018

In December 2017, ASIC published the Enforcement Review Taskforce's report outlining its recommendations for the regulator's enforcement regime. Fifty recommendations were made in the report, including increasing civil penalties for individuals to $525,000 and companies to the greater of $10.5 million or three times the value of benefits obtained or losses avoided or 10% of annual turnover in the 12 months preceding the contravening conduct (capped at $210 million). The Federal Government either agreed or agreed in-principle with all the recommendations, but listed a number for further consideration in light of the Financial Services Royal Commission.

Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 – report tabled on 20 April 2018

On 6 December 2017, the Minister for Justice introduced the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 into Parliament. The Bill introduced a deferred prosecution agreement scheme in Australia and a new offence of failure to prevent bribery by an associate. It also proposed amendments to the current foreign bribery laws. On 7 December 2017, the Senate referred the Bill to the Legal and Constitutional Affairs Legislation Committee for inquiry and a report was tabled on 20 April 2018.

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May 2018

Restricted ADI licensing – commenced 4 May 2018

On 4 May 2018, APRA announced the new restricted authorised deposit-taking (ADI) licensing framework effective immediately. The restricted ADI process allows institutions to conduct a limited, lower risk banking business with a view to obtaining an ADI licence through a faster and lower-cost process.

Treasury Laws Amendment (Banking Measures No. 1) Act – changes to restricted terms effective 5 May 2018

The Treasury Laws Amendment (Banking Measures No. 1) Act amends existing laws in relation to banking, insurance, credit, registrable corporations and financial system regulation. From 5 May 2018, ADIs will be permitted to use the word 'bank' without contravening section 66 of the Banking Act 1959 (Cth). APRA still retains the power to make a determination that an ADI or a class of ADIs are prohibited from using the word 'bank'.

APRA's Superannuation Board Governance Thematic Review – findings published on 17 May 2018

Following APRA's requirement for RSE licensees to formalise their governance framework in Prudential Standard SP S 510 Governance in December 2016, the regulator undertook a thematic review to identify areas for improvement. On 17 May 2018, APRA issued a letter to RSE licensees detailing the findings of its thematic review. In the Letter, APRA recommended that RSE licensees should consider the composition of their boards (in light of the skills and experience required in the context of the RSE licensee's operation and business plan); identify areas of skills deficiency on the board (especially in cases where independent experts are retained); and consider issues such as appointment, succession and performance assessment at the board-level.

Financial Services Royal Commission – third round of hearings held from 21 May 2018

On 14 December 2017, Letters Patent were issued to the Honourable Kenneth Hayne AC QC for the establishment of a Royal Commission into alleged misconduct into the banking, superannuation and financial services industry (Terms of Reference for the Commission can be found here). The third round of public hearings was held on 21 May to 1 June 2018 and focused on lending to small and medium enterprises.

Review into the Competitiveness of the Super System – draft report released on 29 May 2018

The third stage of the Productivity Commission's review of the competitiveness and efficiency of Australia's superannuation system has kicked off, with an issues paper released for comment on 7 July 2017. Submissions closed on 21 August 2017. The inquiry will "make recommendations to improve outcomes for members and system stability as well as reduce barriers for competitiveness and efficiency of the system", using the criteria developed by the Productivity Commission in stages 1 and 2 of the inquiry. We considered the review in our Unravelled publication.

On 29 May 2018, a draft report was released which noted mixed performance across the sector due to 'inadequate competition, governance and regulation'. The report recommended that members should only be allocated a default fund once upon entering employment and proposes to provide prospective members with a 'best in show' shortlist of superannuation funds to choose from. In addition, the report proposes strengthening of the MySuper authorisation rules, improving board governance and amending insurance through superannuation (e.g., insurance provided on an opt-in basis for members under the age of 25). Submissions to the draft report are due 13 July 2018.

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June 2018

Prudential Standard CPS 234 Information Security – submissions closed on 7 June 2018

On 7 March 2018, APRA released its draft Prudential Standard CPS 234 on information security. The draft Prudential Standard proposes to set minimum standards for financial institutions to maintain information kept on its systems and to safeguard against potential cyber-attacks. For example, APRA proposes to require entities to report within 24 hours of an information security incident that materially affects the entity or its customers. Submissions for the draft Prudential Standard closed on 7 June 2018, and APRA intends on implementing the Standard from 1 July 2019.

Retirement Income Covenant – submissions closed on 15 June 2018

As part of the Federal Government's plan to 'develop a retirement income framework to increase flexibility and choice for retirees and help boost living standards', the Treasury released its Retirement Income Covenant Position Paper on 17 May 2018. The Position Paper is part of Stage One of the MyRetirement Framework (otherwise known as the Comprehensive Income Products for Retirement Framework) and proposes to introduce a new covenant for superannuation trustees (except trustees of rollover and defined benefit funds) in the Superannuation Industry (Supervision) Act 1993 (Cth) requiring trustees to consider the retirement income needs and preferences of its members. The Federal Government proposes to introduce the covenant by 1 July 2019 (with commenced delayed until 1 July 2020). For further information, Allens' previous article on the MyRetirement Framework can be found here.

Modern Slavery Act (New South Wales) – received Assent on 27 June 2018

The Modern Slavery Act 2018 (NSW) received Assent on 27 June 2018, with a commencement date to be fixed by Proclamation. Similar to the Commonwealth Modern Slavery Bill 2018, entities (that are commercial organisations) with NSW employees will need to prepare an annual modern slavery statement (in accordance with regulations, which are yet to be published). The Act will only apply to entities with an annual turnover of $50 million or above (as opposed to $100 million or above in the Commonwealth Bill), and a penalty of 10,000 penalty units ($1,100,000) will be imposed for non-compliance (as opposed to no penalty in the Commonwealth Bill). Entities that are subject to similar obligations under law at the Commonwealth (or another prescribed State or Territory) will be exempt from the requirements to comply with the Act.

Financial Services Royal Commission – fourth round of public hearings held from 25 June 2018

On 14 December 2017, Letters Patent were issued to the Honourable Kenneth Hayne AC QC for the establishment of a Royal Commission into alleged misconduct into the banking, superannuation and financial services industry (Terms of Reference for the Commission can be found here). The fourth round of public hearings was held from 25 June 2018 to 6 July 2018 and focused on issues affecting remote and regional communities (including farming finance and interactions between financial services entities and Aboriginal and Torres Strait Islanders).

Asia Region Funds Passport – legislation passed 28 June 2018

The Corporations Amendment (Asia Region Funds Passport) Bill 2018 was introduced to the House of Representatives on 28 March 2018, with a commencement date either to be fixed by proclamation or six months after the day of Royal Assent. The Bill follows the Memorandum of Cooperation on the Establishment and Implementation of the Asia Region Funds Passport on 30 June 2016 between Australia, Japan, Korea, New Zealand and Thailand. Eligible funds will be permitted to be offered across the participating nation's economies under a common set of regulatory requirements – thereby promoting competition and reducing barriers to entry for eligible funds. The Bill was passed by both Houses on 28 June 2018 and is awaiting Proclamation (but will commence on 28 December 2018 at the latest).

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July 2018

BEAR – commenced on 1 July 2018 (and commences 1 July 2019 for small and medium ADIs)

The Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 was passed by both Houses of Parliament on 7 February 2018 and received Royal Assent on 20 February 2018. Allens' previous article on BEAR can be found here. The accountability requirements for large ADIs commenced on 1 July 2018, whereas small and medium ADIs do not have to oblige by BEAR's obligations until next year on 1 July 2019.

Treasury Laws Amendment (Banking Measures No. 1) Act – Credit Card Reforms (part) commenced 1 July 2018

The Treasury Laws Amendment (Banking Measures No. 1) Act will amend existing laws in relation to banking, insurance, credit, registrable corporations and financial system regulation. On 1 July 2018. the following provisions commenced: credit card providers will be prohibited from making any form of credit limit invitations (as opposed the current regime which captures only written invitations and provides an exemption if consent from the customer is obtained). The changes will only apply in relation to communications given on or after 1 July 2018.

Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 – consultation period for proposed Code of Practice ended on 9 July 2018

On 6 December 2017, the Minister for Justice introduced the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 into Parliament. The Bill introduced a deferred prosecution agreement scheme in Australia and a new offence of failure to prevent bribery by an associate. On 8 June 2018, the Federal Government's Attorney-General's Department released a draft Deferred Prosecution Agreement Code of Practice for public consultation. The draft Code sets out the proposed operation of the Deferred Prosecution Agreement Scheme. In particular, it is proposed that the Commonwealth Director of Public Prosecutions will invite corporations (that have engaged in a specified set of corporate offences) to negotiate an agreement on the condition that the corporation satisfy a number of agreed conditions (such as certain disclosure obligations). Submissions for the draft Code of Practice ended on 9 July 2018.

Introduction of the 'Protecting Your Super Package' – submissions closed on 9 July 2018

As part of the 2018-2019 Federal Budget, the Federal Government introduced a range of proposed changes to the superannuation industry under the Protecting Your Super Package. On 21 June 2018, the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 was introduced into Parliament and was referred to the Senate Economics Legislation Committee on 21 June 2018. The changes are proposed to take effect from 1 July 2019 and include various measures to protect superannuation balances, such as: removal of default insurance for new members under the age of 25 or with balances below $6,000 or with inactive MySuper or choice accounts; passive fees (i.e., administration and investment) capped at 3% per annum for accounts with balances below $6,000; and banning of exit fees. Submissions to the Economics Legislation Committee closed on 9 July 2018. For further information on the reforms, Allens published an article on the 2018/19 budget here.

Asia Region Funds Passport Regulations – submissions closed on 13 July 2018

Following the passing by the Senate of the Corporations Amendment (Asia Region Funds Passport) Bill 2018, the Federal Government is sought submissions on an Exposure Draft of Regulations. The proposed Regulations sought to specify the particulars required on a new register of passport funds and the disclosure requirements and exemptions for foreign passport fund products. Submissions closed on 13 July 2018.

Modern Slavery Act in Australia – submissions closed on 20 July 2018

Following the Department of Home Affairs' announcement of the Federal Government's intention to introduce legislation to enact a Commonwealth Modern Slavery Act on 9 May 2018, the Modern Slavery Bill 2018 was introduced into Parliament on 28 June 2018. The Bill proposes to introduce mandatory reporting requirements for entities carrying on a business in Australia with an annual global consolidated revenue of $100 million or more. These entities (although any entity may voluntarily report) must submit a Modern Slavery Statement on an annual basis addressing issues including operations and supply chains, potential modern slavery risks and actions taken to address those risks. For further information, Allens published a Client Update on the Bill which can be found here. The Bill was referred to the Legal and Constitutional Affairs Legislation Committee for inquiry and report by 24 August 2018. Submissions closed on 20 July 2018.

Productivity Commission – review into competition in the Australian financial system – final report expected by 29 July 2018

On 8 May 2017, the Treasurer requested that the Productivity Commission to conduct an inquiry into the Australian financial system. Specifically, the Commission is to consider competition in the financial system with a view to improving consumer outcomes, productivity and competitiveness, and supporting financial system innovation while balancing financial stability objectives. The final report was provided to the Federal Government on 29 June 2018 and is expected to be tabled to Parliament shortly (the Federal Government must table the report by 29 July 2018)

Foreign Financial Service Provider (Modified Licensing Regime) – submissions close 31 July 2018

On 1 June 2018, ASIC released its Consultation Paper 301 (Foreign financial service providers) which proposed the introduction of a new modified Australian Financial Service (AFS) licensing regime for foreign financial service providers. The regulator proposes to repeal two existing AFS exemptions: the 'sufficient equivalent relief' for a foreign financial service provider in relation to certain financial services to wholesale clients where the provider is regulated by a regime sufficiently equivalent to Australia; and the 'limited connection relief' for a foreign financial service provider that requires an AFS licence only due to engagement in inducing (or intending to induce) a person to use its financial services. Both exemptions are proposed to expire on 30 September 2019 (with a transition period for the modified regime until 30 September 2020). Submissions for the Consultation Paper close on 31 July 2018. For more information, Allens published a Client Update which can be found here.

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August 2018

Financial Services Royal Commission – fifth round of public hearings commencing from 6 August 2018

On 14 December 2017, Letters Patent were issued to the Honourable Kenneth Hayne AC QC for the establishment of a Royal Commission into alleged misconduct into the banking, superannuation and financial services industry (Terms of Reference for the Commission can be found here). The fifth round of public hearings will be held from 6 August to 17 August 2018 and focuses on superannuation (including how RSE licensees fulfil their duties to members, with consideration of structural and governance arrangements, and related issues such as selling practices and relationships between superannuation funds and financial advisers).

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September 2018

Financial Services Royal Commission – sixth round of public hearings commencing from 10 September 2018

On 14 December 2017, Letters Patent were issued to the Honourable Kenneth Hayne AC QC for the establishment of a Royal Commission into alleged misconduct into the banking, superannuation and financial services industry (Terms of Reference for the Commission can be found here). The sixth round of public hearings will be held from 10 September 2018 to 21 September 2018, and will focus on insurance.

Financial Services Royal Commission – interim report due 30 September 2018

On 14 December 2017, Letters Patent were issued to the Honourable Kenneth Hayne AC QC for the establishment of a Royal Commission into alleged misconduct into the banking, superannuation and financial services industry. The Terms of Reference for the Commission can be found here. The Commission has been required to submit its Interim Report by 30 September 2018.

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November 2018

Australian Financial Complaints Authority – commences by 1 November 2018

The Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017 received Royal Assent on 5 March 2018, The Act establishes the Australian Financial Complaints Authority (AFCA), to replace the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal. The Minister for Revenue and Financial Services announced on 5 March 2018 that the AFCA will commence receiving consumer and small business disputes no later than 1 November 2018, and consolidates those bodies into a one-stop-shop for complaints related to financial services. All Australian Financial Services Licensees, Australian Credit Licensees, superannuation trustees and other financial firms must become members of AFCA by 21 September 2018. On 31 May 2018, ASIC Instrument 2018/447 was issued which provides relief (until 1 July 2019) from updating external dispute resolution details to refer to AFCA for mandatory disclosure documents, periodic statements and exit statements.

ACCC Mortgage Pricing Inquiry – final report expected by 19 November 2018

In conjunction with the Major Bank Levy, the ACCC is currently undertaking a mortgage pricing inquiry, which will require banks that are required to pay the levy to explain any changes to residential mortgage pricing. The inquiry will relate to prices charged until 30 June 2018. On 31 March 2018, ACCC published its interim report which outlined the regulator's preliminary views including, for example, a lack of vigorous price competition between the inquiry banks and opaque discretionary discounts. The due date for the final report was extended on 15 June 2018 to a date no later than 19 November 2018.

Financial Services Royal Commission – seventh round of public hearings commencing from 19 November 2018

On 14 December 2017, Letters Patent were issued to the Honourable Kenneth Hayne AC QC for the establishment of a Royal Commission into alleged misconduct into the banking, superannuation and financial services industry (Terms of Reference for the Commission can be found here). The sixth round of public hearings will be held from 19 November 2018 to 30 November 2018, and will focus on policy questions arising from the first six rounds of public hearings.

Consumer protection in the banking, insurance and financial sector – report due 15 November 2018

The Senate Economics References Committee has launched an inquiry into 'the regulatory framework for the protection of consumers', including the banking and financial sectors (among them, managed investment schemes). Submissions closed on 7 March 2017 and a report is due by 15 November 2018. We considered this development in our Unravelled publication.

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On the Horizon for 2018

Modern Slavery Bill – legislation expected to pass

The Modern Slavery Bill 2018 was introduced into Parliament on 28 June 2018. The Bill proposes to introduce mandatory reporting requirements for entities carrying on a business in Australia with an annual global consolidated revenue of $100 million or more. These entities (although any entity may voluntarily report) must submit a Modern Slavery Statement on an annual basis addressing issues including operations and supply chains, potential modern slavery risks and actions taken to address those risks. For further information, Allens published a Client Update on the Bill which can be found here. A report from the Senate Legal and Constitutional Affairs Legislation Committee is expected by 24 August 2018.

Enhancing whistleblower protections – legislation expected to pass

The Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 was introduced to the Senate on 7 December 2017. The bill proposes to introduce a whistleblower protection regime for the financial and corporate sectors and to create a whistleblower regime for individuals who disclose entities' breaches of tax laws or misconduct. We expect these reforms to be passed and commence before the end of 2018.

Anti-Money Laundering/Counter-Terrorism Financing – phase 2 underway

Consultation continues this year on the implementation of recommendations made in the report on the statutory review of the Anti-Money Laundering/Counter-Terrorism Financing (AML/CTF) regime released by the Attorney-General's Department in April 2016. The Project Plan released for consultation in late 2016 for implementation of those recommendations has now been finalised.

Phase 1 was completed with the enactment of the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017 (see above at April 2018).

Phase 2 of the Project Plan focusses on significant reforms to simply, streamline and clarify AML/CTF obligations and strengthen compliance with Financial Action Task Force standards. These will be implemented through to 2019. A consultation period commenced from July 2017 through to 2018, with an indicative restructure of the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) being released for consultation on 24 July 2017. We reported on the content of the Project Plan in more detail in our Focus: Road map to anti-money laundering and counter-terrorism financing reform.

Monitoring leverage and risk within the superannuation system – report expected

In 2015, as part of its response to the Financial Services Inquiry, the Federal Government commissioned the Council of Financial Regulators and the ATO to monitor leverage and risk in the superannuation system and report back in three years' time. The Federal Government did not agree with the Financial Service Inquiry's recommendation to prohibit limited recourse borrowing by superannuation funds, on the basis that the data provided was insufficient to justify any intervention.

Introduction of the MyRetirement framework

Following the Financial System Inquiry's recommendation for Comprehensive Income Products for Retirement, the Federal Government has proposed to adopt these recommendations in its MyRetirement Framework. These proposed changes are intended to develop ' a retirement income framework to increase flexibility and choice for retirees and help boost living standards'. A Consultation Paper on the Development of a Framework for Comprehensive Income Products for Retirement was released by the Treasury on 15 December 2016. Most recently, the Government released its Retirement Income Covenant Position Paper on 17 May 2018 as part of Stage One of the Framework (see June 2018).

Superannuation objective – legislation in Parliament

Following on from recommendations arising out of the Financial System Inquiry, the Superannuation (Objective) Bill 2016 was developed to enshrine the objective of the superannuation system. After a consultation period, a report was released on 14 February 2017. The report recommended that the Senate should pass the bill. The bill is currently before the Senate but has not progressed since the second reading was moved on 23 November 2016. The legislation is expected to commence on whichever is first out of 1 January, 1 April, 1 July or 1 October after the day the legislation receives Royal Assent. We considered the Bill in our Unravelled publication.

Extending crowd-sourced equity funding to proprietary companies – bill in Parliament

Crowd-sourced equity funding (CSEF) allows many individuals to invest small amounts in exchange for an equity stake in a company. A CSEF regime for public companies will commence on 29 September 2017. The Federal Government released draft legislation and a draft explanatory memorandum in relation to extending CSEF to proprietary companies, which should assist start ups and small businesses to access capital. Submissions on the draft legislation closed on 6 June 2017. On 14 September 2017, the Treasurer introduced the Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017 to the House of Representatives. The bill passed the House of Representatives on 26 February 2018 and had its Second Reading moved in the Senate on 19 March 2018. Once passed, the CSF framework will be extended to eligible proprietary companies after six months from the date of the Act receiving Royal Assent.

Strengthening trustee arrangements for registrable superannuation licensees – bill in Parliament

The Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017 was introduced to the Senate on 14 September 2017 with a commencement day set as the day after receiving Royal Assent. The proposed amendment follows the 2014 Financial System Inquiry Report and the 2010 Review of the Governance, Efficiency, Structure and Operation of Australia's Superannuation System, both of which considered that greater independence on superannuation trustee boards was desirable. If passed, RSEs will be required to have at least one-third independent directors and the Chair of the Board of Directors must be one of those independent directors. The second reading was moved on 14 September 2017 and the bill is currently being debated before the Senate but has not progressed since December 2017.

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January 2019

Treasury Laws Amendment (Banking Measures No. 1) Act – credit card reforms (remainder) commences 1 January 2019

The Treasury Laws Amendment (Banking Measures No. 1) Act will amend existing laws in relation to banking, insurance, credit, registrable corporations and financial system regulation. On 1 July 2018. the a number of the provisions will commence, which among other things will: prohibit the offering of unsolicited credit card limit increases; simplify interest charge calculations; and allow consumers to reduce credit limits and terminate credit contracts online.

Professional standards of financial advisers – regime to commence 1 January 2019

Following recommendations in 2014 from the Parliamentary Joint Committee to lift standards in the financial advice sector, the Federal Government passed legislation amending the Corporations Act 2001 (Cth), which commenced on 15 March 2017. Starting 1 January 2019, financial advisers will be required to meet higher educational requirements, have a code of ethics and be subject to supervision. Employers of financial advisers will be responsible for ensuring that their employees meet educational requirements and abide by a code of ethics.

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February 2019

Financial Services Royal Commission – final report due 1 February 2019

On 14 December 2017, Letters Patent were issued to the Honourable Kenneth Hayne AC QC for the establishment of a Royal Commission into alleged misconduct into the banking, superannuation and financial services industry. The Terms of Reference for the Commission can be found here. The Commission has been required to submits its Final Report by 1 February 2019.

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July 2019

Open banking data regime – to commence from July 2019

On 31 March 2017, the Productivity Commission handed down its final report into data availability and use to the Federal Government. Treasurer Scott Morrison indicated in the 2017 budget that the Federal Government will implement 'a new open banking regime to give customers control of data about them and to facilitate choice between products and providers'. On 9 May 2018, the Treasurer announced that Open Banking will be phased in from July 2019 with all major banks to make customer data available to customers in relation to credit and debit cards, and deposit and transaction accounts. Remaining banks will be required to implement Open Banking with a 12-month delay. This will be followed by data relating to mortgages from 1 February 2010, and all other identified products by 1 July 2020.

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On the Horizon for 2019

Improved consumer outcomes for mortgage broking – ASIC to implement

ASIC released a report in March 2017 on remuneration arrangements within the mortgage broking industry. It made a number of proposals (including changes to the standard commission model and bonuses, improving oversight of brokers by lenders, and establishing a public reporting regime in relation to competition and consumer outcomes in the home loan market). ASIC proposes to implement these initiatives before a further review of the market is conducted in three to four years. Most recently, in ASIC's submission to the Financial Services Royal Commission on 3 April 2018, the regulator noted that a flat fee arrangement by lenders to brokers may (subject to further consideration) be a viable way to deal with conflicts of interest in remuneration structures.

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