What’s New at ASIC in 2022
There are a number of changes that have been released by ASIC this year. Some key changes are summarised for you below. If you would like more information about anything you read here, please either contact GRC Essentials or refer to the links provided.
1. Warnings and Reprimands (Retail Financial Advisers)
From 1 January 2022, ASIC must provide financial advisers with a written warning or reprimand in specified circumstances. The requirement to give a warning or reprimand was introduced by the Financial Sector Reform (Hayne Royal Commission Response – Better Advice) Act 2021. This allows ASIC to give notice without the requirement to convene a sitting panel or propose to exercise enforcement powers.
A warning will generally be issued to warn a financial adviser against continuing conduct or circumstances that led to the issue of the warning, and a reprimand will generally be issued to admonish a financial adviser in relation to conduct or circumstance that is no longer occurring.
A warning or reprimand is a letter (usually electronically) sent by ASIC to a financial adviser to warn or reprimand them where ASIC has reason to believe that specific circumstances exist. Those circumstances are:7
|Contravention of financial services laws that ASIC does not believe to be serious||A financial adviser has contravened, or been involved in the contravening of, a financial services law and ASIC does not reasonably believe the contravention is ‘serious’ (within the meaning of regulation 12N of the ASIC Regulations) |
NOTE: ASIC intents to update RG263 with details for determining contravention of the above.
|Refusal or failure to implement an AFCA determination||A financial adviser has, at least twice, been linked to a refusal to give effect to a determination made by the Australian Financial Complaints Authority (AFCA) where: |
ASIC does not reasonably believe that the refusal or failure has resulted in material loss or damage to a client or a material benefit to the adviser, and
The failure does not appear to involve dishonesty or fraud.
|Officer of corporations that are unable to pay their debts||A financial adviser has been an officer of two or more corporations unable to pay their debts (s290A(1C) of the Corporations Act)|
|Non-compliance with a TPB order||A financial adviser has not complied with a n order made by the Tax Practitioners Board (TPB) under section 30-20 of the Tax Agent Services Act 2009 as in force immediately before 1 January 2022. Such orders may, for example, relate to continuing professional development or supervision requirements (s1684T(4) of the Corporations Act)|
*Info Sheet 270 Table 1: Warning or reprimand circumstances
The notification of a warning or reprimand will be 3-fold:
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2. Cyber Security
ASIC had set a target of 14.9% improvement in cyber security resilience among firms operating in Australia but have reported only an increase of 1.4%. ASIC strongly encourages businesses to assess their cyber risks and ensure that their cyber security detection systems and response strategies are adequate.
While ASIC is not seeking to prescribe technical cyber security standards yet, or to provide regulatory guidance, however they will consider enforcement action against a business they consider having failed to meet cyber risk management obligations.
In April 2022, the Federal Court found an AFS licensee (RI Advice) breached its general obligations as an AFS licensee by failing to act efficiently and fairly, and failing to have adequate risk management systems. These findings came after a significant number of cyber incidents across their authorised representative network between 2014 and 2020. The court made it clear that cyber security should be front of mind for all licensees, and the importance of adequate cyber security documentation and controls to reduce the risk of a cyber breach.
GRC Essentials offers Cyber Security training, please don’t hesitate to contact us if you would like our assistance with helping you lower your risk of a cyber threat.
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3. ASIC announces financial reporting changes for AFS licensees
On June 3, 2022, ASIC announced new financial reporting requirements for AFS licensees, following changes to the accounting standards. Under these new requirements, AFS licensees’ financial reports must contain disclosures consistent with the financial reports of other for-profit entities and be prepared under standards set by the Australian Accounting Standards Board (AASB).
For-profit companies, registered schemes and disclosing entities that prepare financial reports under Chapter 2M of the Corporations Act 2001 (and are not reporting entities) can no longer prepare special purpose financial reports (SPFRs) that do not contain all disclosures required in the full accounting standards from the financial year commencing 1 July 2021. All entities must apply the full recognition and measurement requirements for assets, liabilities, income and expenses.
The AASB’s new reporting regime will apply for the Chapter 7 financial reports of most AFS licensees, using the public accountability test. The disclosure requirements of the full standards are also required to be applied by some licensees to avoid uncertainty of whether they have public accountability, or because they are large or sophisticated licensees with greater market impact.
All licensees are required to prepare a cashflow statement. In addition to single entity financial statements, consolidated financial statements must be prepared where the licensee has controlled entities.
The new disclosure requirements apply from financial years commencing on or after 1 July 2021, but most licensees can choose to defer any new disclosure requirements by one year. Similar transitional arrangements apply for additional disclosures for licensees that report under Chapter 2M, do not have public accountability, and would otherwise be required to provide additional disclosure under the full standards.
NOTE: these changes will be given legal effect through the certification section of the prescribed ASIC Form FS70 Australian financial services licensee profit and loss statement and balance sheet that was available in late June 2022.
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GRC Essentials can help
If you require any assistance, we can offer training for your personnel or a review of your compliance documents. Please don’t hesitate to contact us if you have any questions or if we can help you with any of your compliance matters.
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