Response to the COVID-19 pandemic

ASIC recognised the extraordinary demands that the COVID-19 pandemic placed on the community and worked with the Government and the Council of Financial Regulators to support businesses and individuals through the challenges they were experiencing.

We acknowledged that participants in the Australian financial services sector were under enormous strain due to the effects of the COVID-19 pandemic and were taking special measures to support customers who are adversely affected.

We therefore limited the regulatory activity that entities were required to respond to as much as possible and worked with the financial services industry to identify areas where we could provide support.

On 23 March 2020, we announced a recalibration of our regulatory priorities to allow us and the entities we regulate to focus on the impact of the COVID-19 pandemic. These temporary changes included the deferral of some activities and the redeployment of staff to address issues of immediate concern, including protecting vulnerable consumers, maintaining the integrity of markets, and supporting businesses.

Our change in focus gave priority to matters where there was the risk of significant consumer harm, serious breaches of the law, and risks to market integrity, as well as time-critical matters.

Key business-as-usual functions were maintained, including registry operations and services; receipt of whistleblower, breach and misconduct reports; and general contact points for industry.

On 14 April 2020, we provided further details of how we had reprioritised our work due to the impact of the pandemic, including consultations, regulatory reports and reviews. While onsite supervisory work was not possible, we continued to monitor firms remotely, including through close working and information-sharing arrangements with the Australian Prudential Regulation Authority (APRA).

We also:

• stepped up our markets supervision work to support the fair and orderly operation of markets, to ensure that investors were appropriately informed, and to protect against manipulation and abuse
• heightened our support for consumers who may be vulnerable to scams, receive poor advice, or need assistance in finding information and support should they fall into hardship
• took other action needed to support firms, such as facilitating the timely completion of capital raisings and other urgent transactions; providing regulatory relief, where appropriate; and identifying measures to support small business.

Despite the challenges posed by the COVID-19 pandemic, we made it clear that we expected entities to treat customers fairly, avoid adding further financial harm or burden to consumers, report material breaches of the law, maintain records of the services they provide, and ensure appropriate supervision of their activities, including where staff are working remotely.

On 11 June 2020, we published five short-term strategic priorities that guided our ongoing work to address the impact of the COVID-19 pandemic.

These priorities, and some of our key actions under each priority, were as follows.

Protecting consumers from harm at a time of heightened vulnerability

• Acting against scams, including cyber-enabled ones, in a coordinated way.
• Helping to ensure that firms offered appropriate support and services to consumers, hardship assistance was provided fairly, and insurance claims were processed efficiently and in good faith.
• Proactively engaging with industry to ensure that fair business standards were maintained.
• Providing consumers with information to help them manage their finances through this crisis and ensuring that information provided by other entities was accurate, particularly around accessing early release of superannuation.

Maintaining financial system resilience and stability

• Responding promptly to market dislocation or disorder.
• Supervising market infrastructure providers and participants to ensure the smooth and continuous operation of markets, including monitoring their cyber resilience.
• Requiring companies to keep the market informed about the impacts of the COVID-19 pandemic on their business.
• Supporting the efficient administration of companies in insolvency.
• Enabling the sound and fair operation of managed investments, including liquidity management and winding up, where necessary.

Supporting Australian businesses to respond to the effects of the pandemic

• Facilitating timely completion of recapitalisations and other urgent transactions.
• Operating our business registers and associated services efficiently and without interruption to access.
• Providing regulatory relief, where appropriate, to help Australian companies do business and continue to provide services to customers.
• Suspending some activities that were not time-critical, including consultations, regulatory reports and reviews.
• Participating as a key member agency of the wider Australian Government response to the pandemic.

Continuing to identify, disrupt and take enforcement action against the most harmful conduct

• Continuing preparations for important future reforms and Government-supported reviews to address consumer harms.
• Working with financial firms to further accelerate the payment of remediation to consumers.

Continuing to build our organisational capability in challenging times

• Putting systems in place to continue to operate effectively while our staff were required to work remotely.
• Effectively mobilising resources around our organisation as priorities changed and some of our work was suspended.
• Coordinating quickly and effectively with domestic and international regulators to respond to crisis impacts as they developed.
• Continuing to build longer term capacity for the future, including in data, communications and the responsiveness of our organisation.

We regularly published updated information about the timing of key outputs to assist industry with planning and resource allocation as part of the transition of the business community to a post-pandemic world.

This included details of changes to our work implementing the recommendations of the Royal Commission, in light of changes to the parliamentary timetable and Government decisions on those measures.

We also warned consumers to be alert to scammers who tried to take advantage of the COVID-19 pandemic environment. The number of investment scam reports from Australian consumers and investors rose during the COVID-19 pandemic, especially related to fake crypto-assets and offers to help people access superannuation or high-return investment opportunities. Reports of misconduct received by ASIC from March to May 2020 were up 20% compared to the same period last year. We directed consumers to tools and resources to help them stay safe online and protect themselves from misinformation.

Our responses to the impact of the pandemic are found on the COVID-19 regulatory information page on our website. We also published a weekly tracker of regulatory document updates, including links to new and updated regulatory guides, information sheets, consultation papers and legislative instruments.

To help Australian consumers and businesses make well-informed decisions in the COVID-19 pandemic environment, we continually updated our Moneysmart COVID-19 hub to reflect the common financial decisions many consumers were navigating. Over a million consumers visited ASIC’s Moneysmart website each month during the pandemic.

Further information about some of our specific initiatives and responses to the impact of the pandemic is set out in Chapter 3.

Supporting Government legislative reform

Throughout the year, ASIC provided ongoing advice and input to support the Government’s law reform agenda.

We are implementing reforms once they are passed by Parliament, including through regulatory guidance.

Implementation of Royal Commission recommendations

We have remained focused on a range of initiatives we began before or in response to the Royal Commission’s recommendations and we are taking action on all Royal Commission recommendations directed at ASIC.

The Royal Commission made 76 recommendations. Over 40 of those require legislative reform to implement, either by amendment to primary legislation or by the making of regulations. The Government made a further 18 commitments in its response to the Royal Commission to address issues raised in the Royal Commission’s final report, a majority of which also require legislation to implement.

Across the year, the Government released numerous exposure draft Bills that addressed the Government’s responses to the Royal Commission final report.

Where recommendations were directed at ASIC or where ASIC could take the initiative, we have acted as a matter of priority. We are expediting the finalisation of our Royal Commission-related enforcement work and we continue to provide advice and input to support the program of law reform agreed by the Government in its response to the Royal Commission’s recommendations.

This includes contributing to Government consultation with stakeholders, focusing on implementation arrangements for new laws as they commence, developing and consulting on supporting legislative instruments, and issuing regulatory guidance to meet industry demand.

We have released a number of consultation papers and guidance, including:

• RG 273 – regulatory guidance about the new best interests duty for mortgage brokers, released 24 June 2020
• CP 329 – consulting on draft legislative instruments implementing aspects of reforms relating to advice fee consents and independence disclosure, and seeking feedback on our proposed approach to guidance on ongoing fee arrangements, released 10 March 2020
• CP 325 – consulting on draft guidance about the new design and distribution obligations, which require issuers and distributors to design, market and distribute products that meet consumer needs, released 19 December 2019
• RG 272 – regulatory guidance about our administration of the product intervention power, including how we use the power and how we make a product intervention order, released 17 June 2020.

On 8 May 2020, the Government announced that, in light of the impact of the COVID-19 pandemic:

• the measures that the Government had indicated would be introduced into Parliament by 30 June 2020 would be introduced by December 2020
• the measures originally scheduled for introduction by December 2020 would be introduced by 30 June 2021
• the commencement dates contained in all exposure draft legislation issued before the pandemic would be extended by an additional six months.

This deferral was intended to allow financial services entities to focus their attention and resources on their COVID-19 pandemic responses and plan for the post COVID-19 pandemic economic recovery.

Immediately after the Government’s announcement, ASIC announced the deferral of commencement of the mortgage broker best interests duty and remuneration reforms to 1 January 2021, and the design and distribution obligations until 5 October 2021, six months after their original commencement dates.

On 11 June 2020, ASIC published information about the proposed timing of consultation and the release of regulatory guidance in relation to legislation implementing the recommendations of the Royal Commission. We will issue further legislative instruments and guidance once Bills implementing various recommendations have been introduced into Parliament. We will continue to communicate with industry in relation to the timing of guidance.

Table 1.3.1 sets out action taken by ASIC in relation to legislative reforms that have already been introduced or are scheduled to be introduced in late 2020.

Table 1.3.2 sets out action taken by ASIC in relation to a number of Royal Commission measures that do not require legislative reform.

Table 1.3.1 Measures requiring legislative reform

For those measures involving law reform, ASIC has issued regulatory guidance or consulted on draft legislative instruments relating to four recommendations, and has taken a number of interim actions ahead of the introduction of legislation as set out in the table below.

Table 1.3.2 Non-legislative measures

ASIC has either completed or taken action in relation to the following recommendations of the Royal Commission that do not require legislative reform.

APRA–ASIC cooperation

ASIC and APRA have a strong, open and collaborative relationship and regularly consult and engage on matters of shared interest.

The Royal Commission recommended that ASIC and APRA prepare and maintain a joint memorandum setting out how they intend to comply with the proposed statutory obligation to cooperate.

On 29 November 2019, APRA and ASIC released a revised memorandum of understanding (MOU). The MOU facilitates more timely supervision, investigations and enforcement action and deeper cooperation on policy matters and internal capabilities.

It also supports additional measures to increase engagement between APRA and ASIC, including regular meetings of ASIC Commissioners and APRA Members, and working together on areas of common interest, including data, thematic reviews, governance and accountability.

Under the framework established by the revised MOU, APRA and ASIC are using dedicated cross-agency working groups to progress work in a number of areas of shared interest, including superannuation, enhanced supervision, corporate governance and culture, and policy considerations relating to the proposed Financial Accountability Regime.

The new structure has allowed ASIC and APRA to work together to consider the near and longer term impacts on jointly regulated industry sectors arising from the COVID-19 pandemic.

ASIC continues to work with APRA to ensure that arrangements are in place to give effect to the commitments in the MOU. This includes reviewing processes and documentation relating to cooperation and information sharing and providing guidance to staff.

ASIC and APRA are also working together to put in place systems and processes required to implement legislation creating a statutory obligation to cooperate and share information, due to be introduced into Parliament by the end of 2020.