summary financial accountability regime bill 2022 (CTH)
Following the Financial Services Royal Commission’s 2019 Final Report on Misconduct in the Banking, Superannuation and Financial Services Industry, the Australian Government reiterated the Financial Accountability Regime Bill 2022 (Cth) after the identical 2021 Bill lapsed due to the April election. The Bill aims to strengthen and increase financial entity and individual accountability across industries regulated by the Australian Prudential Regulation Authority (“APRA”) and implements several recommendations put forth in the 2019 report – namely, there will be a new accountability regime put forth for institutions and their senior executives in the banking, insurance, and superannuation industries. This proposed regime is to be regulated by both APRA and the Australian Securities and Investments Commission (“ASIC”) (together known as “the Regulators”). The new framework intends to ensure that entities regulated by APRA – known as the accountable entities – take reasonable steps to conduct business with “honesty and integrity, and with due skill, care and diligence”, cooperate with the Regulators, ensure senior executives and other key personnel (“accountable persons”) comply with laws ensuring reasonable standards of conduct and to ensure related entities whose activities affect accountable entities also comply with the same frameworks as the accountable entities themselves. The Bill introduces the Financial Accountability Regime Minister Rules 2022 which will be the legislative instrument making rules regarding the carrying out of FAR.
The Financial Accountability Regime will apply to the industry six months after the commencement of the Financial Accountability Regime Bill 2022.
compensation scheme of last resort
Legislation to implement the Financial Services CSLR was introduced into Parliament on 8 September 2022. The objective of the CSLR is to afford compensation of up to $150,000 to unpaid victims, who have received a determination by the Australian Financial Complaints Authority (“AFCA”) to have suffered financial misconduct relating to personal financial advice, credit intermediation, securities dealing and credit provision and are left without redress when a firm becomes insolvent. The CSLR is to be funded by an annual industry-funded levy in which the financial services industry is expected to meet the shortfall when consumers of misconduct go unpaid.
binary options
ASIC has extended its ban on binary options until October 2031, following the finding that the trading of binary options resulted in significant losses being incurred by retail clients. In early September, ASIC released Report 736 Response to submissions on CP 362 Extension of the binary options product intervention order which underpins the decision to ban binary options and details that the following problematic product characteristics ultimately resulted in the ban:
- A payoff structure where one of the two outcomes for binary options contract resulted in retail client losses of the entire investment;
- Short contract duration; and
- Negative expected returns.
crypto taxation
The Australian Government has announced that cryptocurrencies will not be taxed as a foreign currency under the foreign currency tax arrangements and legislation would be introduced to reflect such. Capital gains tax will continue to apply to crypto assets that are held as investments. This amends the A New Tax System (Goods and Services Tax) Act 1999’s definition of “foreign currency” and the Income Tax Assessment Act 1997’s definition of “digital currency”.