Tag: ASIC

Former Aussie Home Loans mortgage broker permanently banned by ASIC

ASIC says it has permanently banned a former mortgage broker, from the credit and financial services industries.

The bans follow an ASIC investigation which led to the former mortgage broker with AHL Investments Pty Ltd (trading as Aussie), being convicted in Downing Centre Local Court on eighteen charges relating to home loan fraud. On each of the eighteen charges, he was convicted and released upon entering in to a recognizance of $1,000 with the condition that he be of good behaviour for three years (refer: 16-293MR).

ASIC’s investigation found that he provided documents in support of eighteen loan applications knowing that they contained false or misleading information.

The applications contained letters which purported to be from the applicant’s employer. These documents were false and in most instances, the loan applicant had never worked for the particular employer.

He has the right to appeal to the Administrative Appeals Tribunal (AAT) for a review of ASIC’s decision.

Background

On 5 July 2016, through his solicitor, he pleaded guilty to seventeen charges under section 160D of the National Consumer Credit Protection Act 2009 (the Credit Act) and one charge under the former Section 33(2) of the Credit Act while he was engaging in credit activity on behalf of Aussie. Section 160D (and the former Section 33(2)) makes it an offence for a person engaging in credit activities to give false or misleading information or documents to another person.

He provided false employment documents to secure approvals for home loans, submitted to Westpac Banking Corporation (Westpac), Australia and New Zealand Banking Group (ANZ) and National Australia Bank (NAB) (refer:16-219MR).

On each of the eighteen charges, He was convicted and released upon entering into a recognizance of $1,000 on the condition that he be of good behaviour for three years (refer:16-293MR).

Since becoming the national regulator of consumer credit on 1 July 2010, ASIC has investigated in excess of 100 matters relating to loan fraud and has achieved many enforcement outcomes against the offenders. The outcomes range from undertakings by persons to voluntarily leave the industry, to bans and prosecutions.

To date, ASIC has banned, suspended or placed conditions of the licence of 80 individuals or companies from providing credit services (including 35 permanent bans). Through the Commonwealth Director of Public Prosecutions, ASIC has brought criminal prosecutions against 14 credit service providers; with 12 having been convicted of fraud or dishonesty offences relating to the provision of false and misleading information or documents to lenders in client loan applications.

ASIC needs a win in 2017, but it’s not likely to come from the banks

From The Conversation.

In a pre-Christmas interview, Greg Medcraft, Chairman of the Australian Securities and Investments Commission (ASIC), looked forward to 2017 and talked tough:

What we want for people to appreciate is that there is nowhere to hide (when it comes to corporate crime).

With new(ish) money from the government, ASIC plans to hire loads of new people and spend big on “data analytics”. [Has no one told ASIC about the problems Centrelink is having with “big data”?

Medcraft was fairly happy with ASIC’s track record in 2016,

In the 12 months to the end of June we undertook 1400 high-intensity surveillances, finished 175 investigations, convicted 22 criminals, jailed 13 people, removed 136 people from the financial services industry.

Sounds impressive until one realises that most of those prosecuted were small fry (dodgy car dealers and the like) and the big end of town has barely been touched. At best it received a tiny tap on the wrist.

2016 was not a good year for ASIC.

In February, the long running scandal of manipulation of the key BBSW base rate burst into the open thanks to investigative journalist Adele Ferguson, and in March, ASIC took ANZ to the federal court. The action against ANZ was repeated later in the year with similar civil proceedings against Westpac and later against NAB. ASIC has not denied that CBA remains in its sights in the BBSW case.

The civil actions over BBSW have been a disaster for ASIC.

First, having to take regulated banks to court is considered in regulatory circles to be a failure. If a resolution for misbehaviour cannot be imposed, it really should be negotiated as it has been in other base rate manipulation cases overseas, with more than US$10 billion of fines and remediation being imposed on international banks for manipulation of LIBOR.

Second the major banks have ASIC over a barrel, admittedly a barrel they chose to lie over themselves. Banks have much more money than regulators to employ legal heavy hitters to drag proceedings out, and have chosen to do so rather than risk a banking royal commission.

In March, another disaster befell ASIC when Adele Ferguson unearthed the CommInsure scandal in which the insurance subsidiary of CBA was found to have dudded policy holders out of insurance compensation that they were entitled to.

As regards CommInsure, ASIC not only should have been searching for the rampant misconduct that was unearthed by the media, it should have taken action over serious misconduct. However, ASIC did what ASIC does best – start a multi-year investigation, which at the end of 2016 has not gone very far.

In April, it got worse. In a “capability review”, the government found that ASIC was a dysfunctional, overworked and under-resourced organisation. With an election on the horizon, Kelly O’Dwyer, the minster responsible, kicked the can down the road, and, hanging Medcraft out to dry, renewed his contract for only 18 months, rather than the usual three years. However, O’Dwyer did reverse the ASIC budget cuts put in place by her predecessor.

In May, ASIC was involved in yet another example of financial misconduct involving major banks being blindsided by dodgy mortgage providers. To its credit, ASIC had initiated the case against the dodgy brokers in 2015, but utterly failed to address the due diligence problems that were unearthed at the major banks. Again, the small fry got fried and the big fish swam away.

The middle of the year was busy for ASIC, mainly keeping its head down during the federal election and ignoring calls for a banking royal commission to address, problems most of which ASIC should have been tackling anyway.

After the election, a new problem hit the headlines. The big four banks were found to have sold products to some customers through their adviser network, with a fee for ongoing advice, but the advice had never been given.

ASIC blamed the problems on “cultural factors”, a topic that Medcraft had been banging on about for some time but obviously has been able to do little about. The latest culprits are so-called “subcultures”, or basically staff who don’t listen to management. ASIC would have been aware of such problems if its staff had read the groundbreaking research on risk culture by Professors Elizabeth Sheedy and Barbara Griffin.

For ASIC, 2016 ended in embarrassment, with ANZ and Macquarie banks being held to account for manipulating base rates. It was the Australian Competition and Consumer Commission (ACCC), not ASIC, which punished the culprits. In his end of year interview, Medcraft said “fining ‘bad apples’ is OK but you have to deal with the tree”, but so far ASIC has given no clue as to what it is going to do about the trees in this particular instance of gross misconduct.

ASIC’s final act of 2016 was farcical. Just before Christmas, the regulator announced that it had accepted an “enforceable undertaking” from the CBA and NAB in relation to the banks’ manipulation of wholesale spot foreign exchange (FX) rates. Overseas, regulators have extracted more than US$10 billion of fines from multiple banks for the so-called Forex fraud and indicted traders, but ASIC could manage fines of only A$2.5 million for each bank to shut down the case, with no one held to account.

It puts in context Medcraft’s comment to the Australian that “If you think about enforcement, you have to have penalties which actually hurt. They can’t be a feather”. Feathery fines of a few million dollars will hardly cause the big banks to “hurt”, unless it’s from laughing.

In his first interview of 2017, Medcraft hinted that he was prepared to roll over and run up the white flag on BBSW. He signalled to the banks that the climb down over Forex showed he was “pragmatic” and that

we’re always open to a settlement … but any settlement has to be credible.

Unfortunately, ASIC has lost what little was left of its credibility in 2016. The regulator could do worse than listen to its own advice to banks:

It gets back to individual accountability. We have to make sure that, where it’s needed, you have a whole-of-management accountability, which is critical.

But if no one else pays attention to ASIC, why should it listen to its own advice?

Author: Pat McConnell, Honorary Fellow, Macquarie University Applied Finance Centre, Macquarie University

ASIC gives the banks cause for Christmas celebration

From The Conversation.

Christmas is a time to forgive and forget and the Australian Securities and Investments Commission (ASIC) sure knows how to distribute good cheer at Yuletide, especially to old friends such as the big four banks.

 

On (almost) the night before Christmas, ASIC popped down the chimney and gave the banks a great big present. Buried among the usual news about banning car dealers and liquidators, the regulator announced that it had accepted an “enforceable undertaking” from the Commonwealth Bank of Australia (CBA) and the National Australia Bank (NAB) in relation to the banks’ wholesale spot foreign exchange (FX) businesses.

The conduct revealed by ASIC would be criminal if other firms tried it and will be criminal in future. Traders at the two banks, had on several occasions between 2008 and 2013: exchanged information about their positions with traders in other banks; shared confidential information about clients’ orders; and, in some cases triggered “stop loss” orders to the financial detriment of clients.

The traders had used inside information to enrich the banks and themselves.

To date, overseas regulators have hit major banks with fines totalling more than US$10 billion for what has become known as the “forex scandal”. For example, the Financial Conduct Authority, the UK equivalent of ASIC, fined JPMorgan some A$379 million for the company’s part in manipulating the daily FX Spot Rate benchmark. JPMorgan traders had been found to have committed the same underhand behaviour that has been discovered in NAB and CBA.

So, what were the fines imposed by ASIC on CBA and NAB – wait for it – A$2.5 million each!

Now this is a really big Christmas pressie for the banks. The story that Santa won’t come if you are a bad child, is obviously rubbish.

The banks have also promised to be good from now on and ASIC has required that they employ a nanny (an independent consultant) and that they put in place changes to their “existing systems, controls, monitoring and supervision of employees”. What were they doing before?

And as a very bad Christmas cracker joke, these fines have been dressed up as a “community benefit” payment to – wait for it – advance “financial literacy education related to the aged care sector”. In other words, we will sell you a dodgy reverse mortgage and then tell you why you shouldn’t have bought it from us in the first place.

How did such a Christmas pantomime come about?

If regulation were a beach cricket match, the banks have just asked ASIC to “follow on” and then scuttled them out for a handful of runs.

ASIC is on the back foot, as it was dealt a big blow by the Federal court recently when its strategy for prosecuting the banks over the bank bill swap rate manipulation was delayed yet again. The banks know that by delaying they are rapidly chewing up ASIC’s (the taxpayers’) money to prosecute of A$80 million.

ASIC has had a bad year. Earlier in the year, it was found by the government to be a dysfunctional, over-worked and under-resourced organisation. Kelly O’Dwyer, the Minster responsible, leapt into action, and renewed Chairman Greg Medcraft’s contract for only 18 months rather than the usual three years.

It looks like 2017 is going to be much worse for the regulator.

As the bankers take off for their Christmas break, they have the hard job of deciding where to spend their record bonuses. For example, Santa has been very good to Ian Narev, CEO of Commbank, who has pocketed a 50% pay rise, despite a string of scandals, involving not only bankers manipulating the FX market, but also the CommInsure scandal.

What exactly does a bank CEO have to do to be left off the Christmas card list these days?

Ask the members of the Parliamentary Committee who had the CEOs of the four major banks over this year for a mild roasting. The result was, as the ex-CEO of ANZ said, “a bit of theatre” – a sort of Nutcracker with the nuts but without the cracker.

Each of the four CEOs was asked about systemic issues and all of them batted back the questions elegantly. Mr Narev, pirouetted around the question noting that he had “lost count of the number of times I have emphasised throughout the organisation the importance of escalation”. The committee members, bedazzled by the consulting speak, did not follow up.

As it turns out, Mr Narev must have been negotiating with ASIC over just the sort of industry-wide misconduct that the members were asking about, but it must have slipped his mind. Likewise, Andrew Thorburn, CEO of NAB, was asked about systemic issues but deflected the questions – nothing to see here – even though, at the time, he too must have been negotiating with ASIC on manipulating the FX benchmark.

Next time, if there is a next time, the Committee must follow up and ask the right questions of the right people.

So, the banks are the undoubted winners in 2016, lots of scandals, laughable fines, no Royal Commission, couldn’t get any better. And they certainly plan to have a Happy New Year.

Author: Pat McConnell, Honorary Fellow, Macquarie University Applied Finance Centre, Macquarie University

ASIC takes action against Westpac entities

ASIC says it has commenced civil penalty proceedings in the Federal Court against Westpac subsidiaries Westpac Securities Administration Limited (WSAL) and BT Funds Management Limited (BTFM) for a number of contraventions, including failures of the ‘best interests duty’ introduced under the Future of Financial Advice reforms.

The proceedings follow an ASIC investigation into Westpac’s telephone sales campaigns targeting superannuation fund members. Specifically, ASIC’s case sets out 15 examples of alleged contraventions of the ‘best interests duty’ arising from two telephone campaigns instigated by WSAL and BTFM.

ASIC alleges that during the two telephone campaigns, WSAL and BTFM provided personal financial product advice to customers, specifically recommending that customers roll out of their other superannuation funds into their Westpac-related superannuation accounts. WSAL and BTFM are not permitted to provide personal financial product advice under their Australian financial services licences. Further, ASIC alleges that WSAL and BTFM did not undertake a proper comparison of the superannuation funds as required by law.

The law provides enhanced consumer protections and imposes greater obligations on financial advice licensees when they provide personal advice.

ASIC also alleges that WSAL and BTFM have:

  • failed to do all things necessary to ensure that the financial services covered by their  licences are provided efficiently, honestly and fairly;
  • failed to comply with the conditions of their licences which only permits those licensees to provide general advice; and
  • failed to comply with the financial services laws in the Corporations Act.

ASIC and Westpac will continue to cooperate to limit the facts in dispute in the proceedings. The first hearing for the proceedings will be on 2 February 2017 at 9.30am in the Federal Court in Sydney.

These proceedings form part of ASIC’s Wealth Management Project, focusing on the wealth divisions of the major banks, AMP and Macquarie (refer: 15-081MR).

Suncorp-Metway pays $530,000 for breaching consumer credit notification laws

ASIC says Suncorp-Metway Limited (Suncorp) has paid infringement notice penalties totalling $270,000 together with remediation of $260,000 after ASIC found it breached important consumer protection provisions.

Due to an internal error, Suncorp failed to notify a large number of consumers of changes in the amount of their loan repayments and, in some cases, failed to advise the consumers of their first direct debit default. This led to some of the consumers inadvertently defaulting on their loans and being contacted by Suncorp’s collections team.

A lender must notify a consumer of changes to loan repayments (for example, amount or frequency of repayments) no later than 20 days before the change takes effect. Further, where a consumer’s direct debit has failed for the first time, the lender is required to send the consumer a direct debit default notice.

ASIC found that between November 2015 and March 2016, Suncorp:

  • failed  to provide consumers with the required written notice regarding a change in loan repayments; and
  • failed to provide consumers with a direct debit default notice.

As a result of these failures, consumers were not given the opportunity to prepare for a change in their repayment obligations or may not have been aware that their direct debit payment had failed. Subsequently, some consumers were subject to collections activity, including telephone calls or letters from Suncorp’s debt collections staff.

ASIC Deputy Chairman Peter Kell said, ‘Companies engaging in credit activity need to ensure that their systems have rigorous checks and balances, so that when errors occur, they are detected quickly and don’t cause disruption to customers’.

‘A change in repayments can have a significant effect on a consumer’s household budget and consumers need to be given time to prepare for that impact. The law demands that lenders keep their customers informed.’

Suncorp has implemented a $260,000 remediation plan refunding any default fees and any interest customers incurred and has paid some consumers reasonable compensation where appropriate. Suncorp has written to all consumers who were affected by the above failures. Consumers who would like to discuss the matter further can contact Suncorp on 13 11 55.

Suncorp has also agreed to engage an external compliance consultant to review its processes and procedures in relation to the causes of the above breaches. The consultant’s report will be provided to ASIC.

Background

Suncorp provides finance to consumers for a variety of purposes, including home loans and motor vehicle finance.

The matter came to the attention of ASIC in March 2016 when Suncorp voluntarily reported the issue. Since becoming aware of the breaches, Suncorp has implemented new processes to prevent a similar occurrence of non-compliance with these provisions.

ASIC conducted its own investigation into Suncorp’s non-compliance. On 16 December 2016, ASIC issued 20 infringement notices totalling $270,000 for 10 breaches of section 65 (repayment changes) and 10 breaches of section 87 (direct debit default notice) of the National Credit Code.

The payment of an infringement notice is not an admission of guilt in respect of the alleged offence. ASIC can issue an infringement notice where it has reasonable grounds to believe a person or body corporate has committed an offence of strict liability against the National Consumer Credit Protection Act 2009 (Cth).

ANZ’s OnePath implements improvements overseen by ASIC

ASIC has confirmed the completion of an independent review by PwC of Australia and New Zealand Banking Group’s (ANZ) OnePath’s compliance functions that was announced in March 2016.

The Independent compliance review of ANZ’s OnePath following breaches resulting in compensation of approximately $4.5 million.

This review followed the reporting to ASIC of a significant number of breaches by the ANZ Group in relation to its life insurance, general insurance, superannuation and funds management activities operated through its wholly-owned OnePath group of companies.

PwC has now completed its review. PwC made six recommendations for improvements to OnePath’s compliance framework. OnePath has implemented four of these recommendations and has committed to complete the other two by early 2017. ASIC will continue to monitor OnePath’s implementation of these final two recommendations.

Background

The ANZ Group’s subsidiaries covered by this review include OnePath Custodians Pty Ltd, OnePath Life Limited, OnePath Funds Management Limited and OnePath General Insurance Pty Limited.

See 16-069MR Independent compliance review of ANZ’s OnePath following breaches resulting in compensation of approximately $4.5 million.

ASIC accepts enforceable undertaking from NAB and CBA to address inadequacies within their wholesale spot FX businesses

ASIC says it has today accepted enforceable undertakings (EUs) from each of the National Australia Bank Limited (NAB) and the Commonwealth Bank of Australia (CBA) in relation to the banks’ wholesale spot foreign exchange (FX) businesses.

As a result of ASIC’s investigation, ASIC is concerned that between 1 January 2008 and 30 June 2013, both banks failed to ensure that their systems and controls were adequate to address risks relating to instances of inappropriate conduct identified by ASIC.

ASIC Commissioner Cathie Armour said, ‘A well-functioning foreign exchange market depends on all participants acting with integrity and fairness. ASIC is committed to ensuring that major financial institutions have in place effective mechanisms for ensuring that their employees are trained, monitored and supervised to provide financial services efficiently, honestly and fairly.’

NAB

ASIC identified the following conduct by employees of NAB between 1 January 2008 and 30 June 2013:

  • on several occasions, a NAB employee on an offshore spot FX desk, acting together with an employee of another Australian bank, shared confidential information and entered offers into the trading platform without any apparent legitimate commercial reason for placing the offers;
  • on a number of occasions, NAB employees disclosed specific confidential details of pending client orders to external market participants, including identification of the client through the use of code names; and
  • on several occasions, NAB employees on an offshore spot FX desk inappropriately exchanged confidential and potentially material information about the bank’s client flow or proprietary positions.

ASIC is concerned that NAB did not ensure that its systems, controls and supervision were adequate to prevent, detect and respond to such conduct, which had the potential to undermine confidence in the proper functioning of the market.

Under the EU, NAB will develop a program of changes to its existing systems, controls, monitoring and supervision of employees within its foreign exchange business to prevent, detect and respond to, amongst others, the following types of conduct:

  1. attempts to manipulate the market for a currency, including by placing offers without a legitimate commercial reason and attempts to influence benchmark rates;
  2. inappropriate trading while in possession of confidential and potentially material information; and
  3. disclosures of client confidential information.

The program and its implementation will be assessed by an independent consultant appointed by ASIC.

Upon implementation of that program, for a period of three years, NAB will provide to ASIC an annual attestation from its senior executives that the systems and controls in its spot FX business are appropriate and adequate to effectively prevent, detect and respond to specified conduct. The program will also be subject to annual internal reviews and assessment by the independent consultant for a period of three years.

NAB will also make a community benefit payment of $2.5 million towards advancing financial literacy education related to the aged care sector and the promotion of ethical behaviour in Australian financial markets.

CBA

ASIC identified the following conduct by employees of CBA between 1 January 2008 and 30 June 2013:

  • on two occasions, CBA employees on an offshore spot FX desk acquired proprietary positions in a currency after coming into possession of knowledge of large CBA fix orders in that currency;
  • on at least two occasions, CBA employees traded in a manner that may have been intended to cause the trigger price for a stop loss order to trade when it might not have traded at that time; and
  • on a number of occasions, CBA employees on an offshore spot FX desk disclosed confidential details of pending client orders to external third parties, including identification of the client through the use of code names.

ASIC is concerned that CBA did not ensure that its systems, controls and supervision were effective in relation to such conduct by its employees. Such conduct had the potential to undermine confidence in the proper functioning of the market.

Under the EU, CBA will develop a program of changes to its existing systems, controls, monitoring and supervision relating to the management of fix orders, management of stop loss orders, and external communications containing specific confidential information to address such conduct. The program will incorporate changes already made by CBA as part of an existing review of its Global FX business.

The program and its implementation will be assessed by an independent consultant appointed by ASIC. Upon implementation of the program, CBA will also provide ASIC with an annual attestation from a senior executive, for a period of three years, that the systems and controls in its spot FX business are appropriate and adequate to effectively manage specified conduct risks.

CBA will also make a community benefit payment of $2.5 million towards advancing financial literacy education related to the aged care sector.

ASIC encourages market participants to adhere to high standards of market practice, including those set out in the Global Code of Conduct for the Foreign Exchange Market, published by the Bank of International Settlements (BIS Global FX Code). The BIS Global FX Code provides a global set of good practice guidelines to promote the integrity and effective functioning of the wholesale foreign exchange market. Phase 1 of the Code was published in May 2016, and Phase 2 is due for publication in May 2017.

ASIC is grateful for the assistance of our international regulatory counterparts in progressing our investigation, including the UK Financial Conduct Authority and the NZ Financial Markets Authority.

Background

The wholesale spot FX market is an important financial market for Australia. It facilitates the exchange of one currency for another and thus allows market participants to buy and sell foreign currencies. As part of their spot FX businesses, both banks entered into different types of spot FX agreements with their clients, including Australian clients.

Spot foreign exchange refers to foreign exchange contracts involving the exchange of two currencies at a price (exchange rate) agreed on a date (the trade data), and which are usually settled two business days from the trade date.

ASIC releases world-first licensing exemption for fintech businesses

ASIC has today released class waivers to allow eligible financial technology (fintech) businesses to test certain specified services without holding an Australian financial services or credit licence.

ASIC Commissioner John Price said, ‘ASIC’s ‘fintech licensing exemption’ is unique. No other major jurisdiction has implemented a class waiver which allows eligible businesses to notify the regulator and then commence testing without an individual application process.’

ASIC has also released Regulatory Guide 257 Testing fintech products and services without holding an AFS or credit licence (RG 257), which contains information about Australia’s ‘regulatory sandbox’ framework.

That framework is comprised of:

  • existing flexibility in the regulatory framework or exemptions already provided by the law or ASIC which mean that a licence is not required. Examples include existing ASIC relief for non-cash payment products like stored value cards and regulations meaning that a licence is often not required for certain foreign exchange services;
  • ASIC’s fintech licensing exemption provided under ASIC Corporations (Concept Validation Licensing Exemption) Instrument 2016/1175 and ASIC Credit (Concept Validation Licensing Exemption) Instrument 2016/1176
  • tailored, individual licensing exemptions from ASIC to facilitate product or service testing – individual exemptions of this nature are similar to the ‘regulatory sandbox’ frameworks established by financial services regulators in other jurisdictions.

ASIC Commissioner John Price said, ‘Fintech and start-up businesses now have more pathways than ever to begin testing the viability of innovative financial services and credit services consumers, before incurring many of the regulatory costs normally associated with running their business.’

Fintech licensing exemption

ASIC’s fintech licensing exemption allows eligible businesses to test specified services for up to 12 months with up to 100 retail clients, provided they also meet certain consumer protection conditions and notify ASIC before they commence the business.

‘ASIC’s fintech licensing exemption reflects our commitment to facilitating innovation in financial services. However, we are equally committed to ensuring that innovative products and services are regulated appropriately and promote good consumer outcomes,’ Mr Price said.

The fintech licensing exemption was initially proposed in Consultation Paper 260 Further measures to facilitate innovation in financial services (CP 260). ASIC has amended its proposal in light of the feedback received, including extending the testing period and expanding the products in relation to which services can be tested.

Information about the services covered by the fintech licensing exemption, is available in an ASIC infographic, as well as in RG 257.

Businesses that are not eligible for the fintech licensing exemption are able to seek an individual exemption. ASIC’s policy on exemptions is available in Regulatory Guide 51 Applications for relief (RG 51).

‘Individual applications are an important part of Australia’s regulatory sandbox framework,’ Mr Price said. ‘For instance, this option is open to existing licensees who wish to test an innovative product or service and comply with a modified version of the law.’

Other measures to facilitate innovation

ASIC has today also released updated guidance to licensees on satisfying the requirements to maintain competence in Regulatory Guide 105 Licensing: Organisational competence (RG 105) and Regulatory Guide 206 Credit licensing – Competence and training (RG 206). These updates are also based on feedback received to proposals in CP 260.

The updated guidance in RG 105 provides greater flexibility for some ‘small-scale, heavily automated businesses’ seeking to nominate a responsible manager. These businesses may now nominate a responsible manager without day-to-day involvement in the business to provide regular sign-off on the licensee’s processes and systems and the quality of financial services provided.

RG 105 has also been updated to include six examples to help illustrate the how we assess submissions about a responsible manager’s knowledge and skills under Option 5 of RG 105.

Mr Price said, ‘These are important updates to our licensing regime which take into account the circumstances of new innovative businesses and facilitate these businesses to meet the organisational competence requirements in alternative ways.’

Download

Regulatory Guide 257 Testing fintech products and services without holding an AFS or credit licence

New ASIC funding model a “tax” on brokers, MFAA warns

From Australian Broker.

The Mortgage & Finance Association of Australia (MFAA) has expressed concern about a new industry funding model proposed by the Australian Securities & Investments Commission (ASIC).

The model, which is set to commence in the second half of 2017, hopes to draw funds for ASIC from parties within the finance industry.

“ASIC has long believed that those who generate the need for ASIC’s regulation should pay for it, rather than the Australian public,” said ASIC chairman Greg Medcraft.

“An industry funding model for ASIC is about establishing price signals to drive economic efficiencies in the way resources are allocated within ASIC. Industry funding will also improve ASIC’s transparency and accountability. That means business will better understand the job we do by having greater visibility of the cost of doing that job.”

However, Cynthia Grisbrook, chairman for the MFAA, has warned that proposed changes would see licensed mortgage brokers and broker groups paying “up to seven times” the amount for each dollar of credit facilitated compared to lenders.

“We believe that this equates to a ‘tax’ on brokers. Unlike lenders, brokers are – in most cases – unable to pass this additional cost on down the value chain,” she said.

Under the current proposal, licenced brokers and broker groups would face a levy rate of $1,000 plus $1.14 per $10,000 on credit intermediated greater than $100 million. This was compared to $2,000 plus $0.15 per $10,000 facilitated for lenders on credit provided greater than $100 million.

“On ASIC’s current calculations this could leave licensed brokers and aggregators (where applicable) each out of pocket in the amount of $39.90 on an average $350k mortgage given that the levy is charged at multiple points in the value chain. Lenders would be levied $5.25 on the same average $350k transaction,” Grisbrook said.

While these amounts would only be payable once the relevant party has reached the threshold of $100 million – which Grisbrook admitted may not affect brokers directly – she warned that this could impact aggregators who may then expect brokers to carry a portion of the cost.

“Overall, the MFAA believes that the model currently under consideration is inequitable, anticompetitive and unnecessarily complex to administer,” she said.

The proposed changes could also lead to the consolidation of licensing with many individually-licensed brokers handing back their licences and joining broker groups instead. This would reduce industry competition, Grisbrook warned.

“The MFAA is currently working with members and other industry participants to develop an alternative model based on the following four principles: simplicity, equity, achievability and neutrality.”

To get a feel for any unintended consequences, the MFAA is talking with aggregator and member groups, Grisbrook told Australian Broker.

“We have a lobbyist panel that’s made up of a lot of aggregators, and we’re sharing information and data to look at different angles.”

The MFAA also has a select group of brokers that it is working with on this. “We’ve sent something out for their input,” she said.

ASIC is currently taking submissions on the proposed funding model through the Treasury website. The submission process will close on 16 December.

In light of this short deadline, the MFAA has spoken to ASIC and is seeking an extension so that all industry players are on board and are working towards a common goal, Grisbrook said.

“We want everybody who’s involved in this to have a say in it and ensure that we’re all on the same page.”

ASIC bans former ANZ Financial Planning adviser from financial services

ASIC says they have banned a former employee of ANZ Financial Planning, from providing financial services for a period of five years.

He was a financial planner with ANZ Financial Planning at Hurstville between 19 January 2006 and 30 July 2014.

He was banned from providing financial services as ASIC found that he engaged in misleading and deceptive conduct by creating false documents and falsely amending documents contained on client files. The conduct included:

  • writing clients’ names and initials on documents in the places designated for their signatures and initials;
  • changing the dates recorded on a number of documents; and
  • creating false investor profile forms for two clients by photocopying forms they had signed in previous years and changing the dates on the copied documents.

Deputy Chairman, Peter Kell said, ‘Financial advisers are important gatekeepers who must act honestly to increase broader public confidence in the financial services industry.

‘This banning should serve as a deterrent to any financial adviser tempted to act dishonestly.’

He has the right to seek a review of ASIC’s decision to the Administrative Appeals Tribunal.

Background

ASIC’s work in the Wealth Management Project covers a number of areas including:

  • Working with the largest financial advice firms to address the identification and remediation of non-compliant advice; and
  • Seeking regulatory outcomes, when appropriate, against licensees and advisers.