ASIC has revealed that it will soon publish its regulatory guide for mortgage brokers on how it will assess compliance with the best interests duty obligations.
The financial services regulator has released an update of the timing of its regulatory work and priorities.
Earlier this year, the Australian Securities and Investments Commission (ASIC) stated it would temporarily change its regulatory work and priorities to allow it and regulated entities to focus on the impact of COVID-19.
It also announced that the introduction of the best interests duty (BID) would be pushed back to 1 January 2021 to allow the industry to focus on managing the COVID-19 crisis. The BID was initially scheduled to take effect on 1 July 2020.
According to the regulator, its decision was made to allow industry participants to “focus on immediate priorities and the needs of their customers” amid the COVID-19 crisis.
The postponement of the duty was welcomed by industry given the current operating environment and the lack of final guidance from ASIC around how it would assess the best interests duty.
Guide expected in ‘June/July 2020’
Its draft guidance, which was published in February of this year, went through consultation over February and March, and final guidance was expected to be released before the obligations were originally set to commence on 1 July 2020.
ASIC has now revealed that it will publish a new regulatory guide on how it will assess compliance with the best interests obligations in Pt 3-5A of the National Consumer Credit Protection Act 2009 by July 2020.
The indicative timing of “June/July 2020” will provide the mortgage brokers and other relevant credit licensees with six months to prepare for its implementation date of 1 January 2021.
Reference checking consultation
As well as outlining that the new BID guidance will be released soon, the regulator also said that it intends to consult on a draft legislative instrument and information sheet on a reference checking protocol for mortgage brokers and financial advisers, and updates to the regulatory guide surrounding credit licensing.
The consultation is expected “later of October 2020 or on introduction of legislation into Parliament”.
It aims to meet the banking royal commission’s recommendations that mortgage brokers and financial advisers should be bound by information-sharing and reporting obligations and take the same steps in response to detecting misconduct.
The final report of the royal commission recommended that AFSL and ACL holders should be required, as a condition of their licence, to give effect to reference checking and information-sharing protocols and report “serious compliance concerns” to ASIC on a quarterly basis.
It also suggested that certain steps should be taken to inform and remediate affected customers where misconduct has occurred.
ASIC has said that it intends to consult on a new information sheet about new requirements for financial advisers and mortgage brokers to investigate misconduct and notify and remediate affected clients in February 2021 (contingent on the government’s timing of introduction of the bill into Parliament). Draft legislation on the issue was released earlier this year.
The regulator has also said it plans to publish its regulatory guidance on product design and distribution obligations in Q3 2020, responding to industry requests for guidance to be finalised as soon as possible.
ASIC has already deferred commencement of its design and distribution obligations until 5 October 2021. They were originally to commence on 5 April 2021, following a two-year transition period.
ASIC chair James Shipton commented: “The revised timetable of ongoing work is an important step in assisting the transition of the business community and broader economy to a post-pandemic world.
“However, it is important to note that the fact that some work has been delayed longer than would otherwise be desirable is not an abrogation of our regulatory work, but a recognition that some existing activities and new tasks must take precedence over work we would otherwise be doing.
“Indeed, a number of important enforcement outcomes have been achieved in the past two months, as the courts have continued to hear matters and deliver judgments,” he said.
More to come.
[Related: ASIC delays BID implementation]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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