The Regulatory Regime: Aspects for Banking Anastasia Zafeirakopoulos Australian Phil Hellenic Lawyers Association [e-mail]

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The Regulatory Regime Aspects for
BankingAnastasia ZafeirakopoulosAustralian
Phil Hellenic Lawyers Associationadmin_at_alphalaw.c
om.au

• Disclaimer
• This material represents the opinion of Anastasia
  Zafeirakopoulos and not necessarily that of
  Australian Phil Hellenic Lawyers Association and
  not of her employer. The content covered is for
  general information only and it is not intended
  nor should it be relied upon as a substitute for
  other appropriate professional advice. The author
  is not liable for any errors or omissions in the
  content, or for any consequences resulting from
  any errors or omissions, including any loss
  resulting from reliance on the content.

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Overview

• Legislative framework
• Government Regulators
• Licensing regime Financial Service providers
• Australian Securities Investments Commission
  (ASIC)

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Legislative Framework

• General Regulatory Legislation
• Corporations Act 2001 (Cth) (CA)
• Credit Legislation
• Uniform Consumer Credit Code
• Privacy Act 1988 (Cth)
• Financial Sector (Shareholdings) Act 1998 (Cth)
• Financial Sector (Collection of Data) Act 1998
  (Cth)
• Industry-Specific Legislation
• Banking Act 1959 (Cth)
• Life Insurance Act 1995 (Cth)

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Legislative Framework (contd)

• Cash Transaction Monitoring
• Proceeds of Crime Act 2002 (Cth)
• Anti- Money Laundering Counter-Terrorism
  Financing Act 2006 (Cth)
• Financial Transaction Reports Act 1988 (Cth)

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Government Regulators

• Role of government regulators
• Primary regulators in the financial markets
• - Australian Prudential Regulation Authority
  (APRA)
• Reserve Bank of Australia (RBA)
• Australian Securities Investments Commission
  (ASIC)
• Other general regulatory bodies
• Australian Competition Consumer Commission
  (ACCC)

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Role of Regulators

• Preventing market failure.
• Allowing financial markets to perform
  efficiently.
• Flexible framework.
• Regulatory agencies based on functional lines.

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APRA

• Australian Prudential Regulation Authority Act
  1998
• Regulates bodies in the financial sector
• Banks, credit unions, building societies
• general insurance and reinsurance companies
• life insurance and
• most members of the superannuation industry.
• www.apra.gov.au

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RBA

• Reserve Bank Act 1959
• Formulates implements monetary policy
  contributing to
• stability of the currency
• maintenance of full employment
• Economic prosperity.
• Also role to
• maintain financial system stability
• promote the safety efficiency of the payments
  system
• www.rba.gov.au

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ASIC

• Australian Securities Investments Commission
  Act 2001 (Cth)
• promote confident informed participation by
  investors consumers in the financial system
• make information about companies and other bodies
  to the public
• improve the performance of the financial system.
• regulates
• Australian companies
• financial services businesses
• company directors officers
• financial markets
• www.asic.gov.au

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Licensing Regime Financial Service Providers

• Australian Financial Services Licence (AFSL)
• General Obligations
• Authorised Representatives
• ASIC

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Australian Financial Services License (AFSL)

• Person who carries on a financial services
  business in this jurisdiction must hold an AFSL
  covering the provision of the financial services
  (s911A(1))
• Unless the person is exempt from the requirement
  to hold an AFSL (s911A(2)).
• A person provides a financial service if they
• provide financial product advice (s766B)
• deal in a financial product (s766C)
• make a market for a financial product (s766D)
• operate a registered scheme
• Provide a custodial or depository service
  (s766E) or
• conduct prescribed by the regulations for these
  purposes.(Reg 7.1.06A Reg. 7.1.29-Reg. 7.1.33H).

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AFSL (contd)

• financial product
• General definition (s763A CA)
• makes a financial investment
• manages financial risk
• makes non-cash payments
• Specific inclusions (s764A CA) such as
• Securities
• Futures
• Registered schemes
• Debentures stock or bonds
• Specific exclusions (s765A CA) such as
• Health insurance re-insurance
• Foreign exchange with immediate settlement
• Credit facilities

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General Obligations (s912A CA)

• efficiently, honestly and fairly
• adequate arrangements to manage conflicts of
  interest
• comply with conditions on AFSL
• comply with financial services law
• ensure representatives comply with the financial
  services law
• adequate resources
• adequate supervisory arrangements
• training requirements for licensees

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General Obligations (contd)

• Other requirements for licensees providing
  financial services to retail clients
• Adequate risk management systems
• Dispute resolution procedure
• Compensation arrangements (s912B).
• Regulatory Guides relating to Licensing
• RG104 Meeting the general obligations
• RG 105 Organisational competence
• RG 146 Training of financial product advisers
• RG 164 Organisational capacities
• RG 165 Internal external dispute resolution
• RG 166 Financial requirements
• RG 126 Compensation Insurance arrangements for
  AFS licensees

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Obligation to Notify ASIC

• Breaches or likely to breach
• general obligations (s912D(1) CA) and
• Is significant, having regard to
• Number of frequency of similar previous breaches
• Impact on licensees ability to provide financial
  services covered by the license
• Extent that licensees arrangements to ensure
  compliance with general obligations is
  inadequate
• Actual or potential loss to clients or licensee
• Within 5 days of becoming aware licensee must
  give a written report to ASIC
• Failure to comply is an offence.
• RG 78 Breach reporting by AFS licensees

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ASIC

• ASICs role in licensing regime
• granting AFSL
• monitoring licensees obligations
• maintains for inspection registers of licensees
  and authorised representatives. (ss922A and 922B
  CA).
• ASIC power to make a banning order (s920A CA)
• By giving written notice to the person if
• AFSL held by that person is suspended or
  cancelled by ASIC or
• ASIC has reason to believe the person will not
  comply with their AFSL obligations or
• person becomes insolvent under administration or
  
• person is convicted of fraud
• person has not compiled with a financial services
  law or
• ASIC has reason to believe that the person will
  not comply with a financial services law.

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Banning Order (cont)

• Right to hearing (ss920A(2)-(3) CA)
• opportunity to make submissions to ASIC
• appear before ASIC takes place in private
• does not apply to
• immediate suspension/ cancellation of ASFL
  holder
• if person has been convicted of serious fraud.
• Effect of Banning Order (s920B(2) CA)
• Prohibits the person from providing a financial
  service, permanently or for a specified period.
• Purpose of banning order
• Not to punish or to impose a penalty
• Relevant Regulatory Guides
• RG 8 Hearing practice manual
• RG 98 Licensing administrative action against
  financial service providers

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Anastasia ZafeirakopoulosAustralian Phil
Hellenic Lawyers Associationadmin_at_alphalaw.com.au

• Disclaimer
• This material represents the opinion of Anastasia
  Zafeirakopoulos and not necessarily that of
  Australian Phil Hellenic Lawyers Association and
  not of her employer. The content covered is for
  general information only and it is not intended
  nor should it be relied upon as a substitute for
  other appropriate professional advice. The author
  is not liable for any errors or omissions in the
  content, or for any consequences resulting from
  any errors or omissions, including any loss
  resulting from reliance on the content.