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So, what’s been happening in the financial services world over the last few weeks? Well, ASIC began February on the front foot by releasing policy documents discussing how it undertakes investigations and enforcement activity.
Importantly, the regulator will look at your compliance history and infrastructure when deciding what remedy to pursue. What does this mean in reality? Well just ask CBA (misleading credit card invitations) and Leighton Holdings Limited (continuous disclosure) who were both hit with recent Enforceable Undertakings, as well as a $300,000 fine for Leighton.
ASIC updates – Disclosure, disclosure, disclosure
February was a busy month again for Regulatory Guide (RG) releases and, following on from the January release of a similarly structured ‘Benchmark and Disclosure’ type guide (RG 231: Infrastructure entities: Improving disclosure for retail investors), RG 232 was released soon after, outlining five benchmarks and five disclosure principles (on an ‘if not, why not’ basis) that apply to agribusiness schemes.
Operators of these types of schemes should disclose the benchmark and disclosure principle information in any PDS dated on or after 1 August 2012.
Investors with short memories may have forgotten Timbercorp and Great Southern. However, if you do fancy a punt then a useful document for investors has also been published by ASIC
The release of the more general RG 234: (Advertising financial products and advice services) sets out ASIC’s views on the obligations of financial service providers to not make false or misleading statements, or engage in misleading or deceptive conduct, under the Corporations and ASIC Acts.
The new RG 234 applies to promoters of financial products and financial advice services (product issuer, financial adviser etc) as well as publishers of promotions about financial products and financial advice services.
The scope of ‘advertising’ in the RG is wide and in line with the current advances in social media, with the RG specifically referencing video streaming (e.g. YouTube), social networking, microblogging (e.g. Twitter), audio messages for telephone callers on hold and presentations to groups of people, seminars and advertorials.
Enforcement options available to ASIC in this area include injunctions, enforceable undertakings, civil/criminal penalties and loss of your AFSL, so don’t be fooled into thinking that this guide is just best practice.
The FOFA reforms were essentially created in response to growing concerns that the financial planning industry was all sales and very little advice. Following months of industry backlash and complaints across the sector as well as rumours of industry deals and trade-offs, it comes as no surprise to see that the application of the provisions will be voluntary until 1 July 2013, but I am sure there will be more along the way.
What does this mean in reality? Well, any business that wants to start complying with the reforms from 1 July 2012, or has spent time, resources and money in anticipation of the reforms, can do so. The rest of the industry will be required to comply from 1 July 2013, but I am sure there will be more risks along the way.
Last month we highlighted amendments to Chapter 15 of the AML/CTF Rules, which indicated, amongst other things, that Enhanced Customer Due Diligence (ECDD) must now be applied if a Reporting Entity is entering into a transaction, or proposing to enter into a transaction, and a party to the transaction is physically present in, or is a corporation incorporated in, a prescribed foreign country.
The recent registration of Part Three of the AML/CTF Regulations 2008 means that, from 1 March 2012, Iran will be considered to be a prescribed foreign country under the AML/CTF Act.
Where applicable, Reporting Entities should update their ECDD Program to ensure, amongst other things, that related operational policies and procedures, such as those relating to new customer applications, are updated, as well as considering updates to internal training.
Finally, as 31 March draws ever closer, Reporting Entities should ensure that s.47 Compliance Reports are submitted to AUSTRAC for 1 Jan-31 Dec 2011.
It is perhaps a good time to undertake an Independent Review of your AML/CTF Program, especially in light of the various Rule changes in the last 12 months. These changes include new Parts 8.9/9.9 of the AML/CTF Rules which will presumably place a positive obligation on all Reporting Entities to document the systems and controls that have been implemented to ensure compliance with Suspicious Matters, Threshold Transactions, International Funds Transfers and s.47 Compliance Reporting procedures.
Compliance with Current and Future Child Protection Laws – Embedding a Child Protection Culture. How can this be achieved?