All holders of an Australian Financial Services License (AFSL) with a retail client authorisation will need to comply with ASIC’s internal dispute resolution (IDR) reporting framework. Summary reports will need to be provided to ASIC on a 6 monthly basis, highlighting the status of each client complaint. Reporting obligations commence from 1 July 2023 (for reporting in January or February 2024). AFSL holders should put systems in place now to ensure all required information is being captured.Read More
By Daniel Knight and Oliver Herrmann
New licensing requirements for crypto service providers are coming, following a series of consultations launched last week by Treasurer, Jim Chalmers. The Government approach focuses on strengthening enforcement, bolstering consumer protection and ultimately establishing a new licensing framework.Read More
In the wake of the drawn out cryptocurrency market downturn, increased regulation of the sector seems inevitable. With nearly one million Australians transacting in cryptocurrencies last year, there have been widespread calls to enact additional protections for retail investors.Read More
On 30 May 2019, the Australian Securities and Investments Commission (ASIC) updated its Information Sheet 225 which sets out guidance for entities that are looking to raise funds through initial coin offerings (ICOs) or are otherwise involved with crypto-assets. Interestingly, ASIC has grouped crypto-asset participants into several distinct categories and has broadly set out the obligations that may apply to participants in each category.
Particular aspects of the information sheet that may be of interest to crypto-asset participants include:
- ASIC has stated that entities should be prepared to justify a conclusion that their ICO does not involve a regulated financial product;
- platform operators that allow crypto-assets that are financial products to be traded on the platform must hold an Australian market licence or be otherwise exempt. As at the time of release, there are no platform operators that have been appropriately licensed or exempt;
- assessments of Australian Financial Services (AFS) licence applications for the purposes of crypto-asset-related financial products may take more time; and
- clearing and settlement obligations may apply to “miners” that are part of the clearing and settlement processes for tokens that are financial products.
In summary, while ASIC’s updated Information Sheet does not break any new ground in relation to the regulation of crypto-assets in Australia, it serves as a useful resource for any entity that is looking to be involved as a crypto-asset participant. We remind our readers there are many avenues to market for token issuers, even where their tokens constitute financial products, and it may be useful to seek legal advice in this regard. For example, tokens that only constitute securities can be offered to sophisticated investors without attracting significant disclosure obligations including the provision of a prospectus.
On 30 April 2019, Australian Securities Exchange (ASX) released the first of seven “drops” of software code into the “Customer Development Environment”. This marks the beginning of the introduction of the new equities clearing and settlement system, which ASX is developing to replace the existing CHESS system. The new system is based on distributed ledger technology (DLT) and promises to provide customers with access to real-time, synchronised, source-of-truth data.Read More
In January 2019, Canada’s largest cryptocurrency exchange, QuadrigaCX, announced that it had lost $180 million of virtual currency, prompting calls for tighter regulatory oversight of the industry.
Canada is home to 18 publicly listed cryptocurrency companies, more than any other jurisdiction in the world. This puts Canada at the heart of the issue, and has also put the Canadian Public Accountability Board (CPAB) on notice. The CPAB, which regulates auditors, has confirmed that it has been reviewing how existing Canadian audit standards apply to the cryptocurrency industry. Canada, like Australia, subscribes to the International Financial Reporting Standards.Read More
In December 2018, the US Securities and Exchange Commission (SEC) settled an enforcement action with Wealthfront, one of the industry’s leading robo advisors. This came after Wealthfront made false statements about its software’s ability to implement a ‘tax-loss harvesting’ strategy. Wealthfront failed to properly execute the strategy, resulting in losses to a significant number of clients. Wealthfront ultimately agreed to pay a $US 250,000 penalty.Read More
By Jim Bulling and Luke Camilleri
On 1 February 2019, the Australian Securities and Investments Commission (ASIC) announced its participation in the recently created Global Financial Innovation Network (GFIN). The GFIN is comprised of 29 regulatory bodies from jurisdictions such as Hong Kong, Singapore and the United Kingdom. The GFIN was established to:
- act as a network of regulators to collaborate and share experiences of innovation in respective markets, including emerging technologies and business models, and to provide accessible regulatory contact information for firms;
- provide a forum for joint regtech work and collaborative knowledge sharing; and
- provide firms with an environment in which to trial cross-border solutions.
By Jim Bulling and Elise Hamblin
Fintech lenders must continue to take into consideration the unfair contract terms laws that have applied since 12 November 2016. As set out in a recent ASIC Report 565 “Unfair Contract Terms and Small Business Loans”, unfair contract terms are currently areas of concern for ASIC. To date, ASIC has found that eight lenders have failed to take sufficient steps to comply with their obligations under the unfair contract terms laws.
The Australian Council of Financial Regulators (CFR) today published an Issues Paper reviewing the regulatory regime of stored-value facilities including purchased payment facilities (PPFs). The CFR comprises regulators such as APRA, ASIC and the RBA.
PPFs enable funds to be stored for the purpose of making future payments and include mobile wallet services and prepaid cards. PPF providers must be licensed and supervised by APRA or otherwise rely on an exemption from complying with the legislative requirements. The RBA has declared several class exemptions for PPFs, including the “limited-value facilities” exemption for PPFs with payment obligations of $10 million or under.
To date, PayPal is the only entity licensed and supervised by APRA as a PPF provider and only one entity has obtained individual exemption from the RBA. These results support arguments that the current framework is too complicated, deters potential new entrants and imposes significant compliance costs.