COVID-19 (Coronavirus) Financial Services Regulatory Response as at 15 April 2020

Reserve Bank April 2020 Financial Stability Review

It’s hard to believe that the Australian Government only announced its first COVID-19 economic response just over a month ago on 12 March 2020 with a one-off $750 first payment to persons receiving social assistance and cash flow assistance to SMEs.

The full list of the Government’s fiscal responses is recorded in the Reserve Bank’s April Financial Stability Review.

The Reserve Bank assessment of the financial impacts of COVID-19 includes:

“The COVID-19 pandemic is causing significant strains in the global financial system. The COVID-19 pandemic brought to an end an extended period of stable (but only moderate) growth, low inflation, and low financial market volatility. Prior to the pandemic, the prices of a broad range of risky assets had been at high levels, underpinned by low risk-free interest rates and low risk premiums that presumed very little possibility of adverse outcomes. The outbreak of the virus, which was not even a feature in the outlook at the start of the year, has changed this.

The exceptional measures taken to contain COVID-19 are having a major effect on economic activity and the global financial system…

With many staff working from home and from different locations, financial institutions face increased operational risks and may have less capacity to take on and manage market risk. It has changed the nature of some IT and cyber risks…

The Australian financial system enters this challenging period in a strong starting position. Capital levels are high and the banks’ liquidity position has improved considerably over recent times.”

ASIC grants financial advice relief during the COVID-19 pandemic

ASIC has registered the ASIC Corporations (COVID-19—Advice-related Relief) Instrument 2020/355 to give three temporary relief measures related to financial advice during the COVID-19 pandemic.

UPDATE: The ASIC Corporations (COVID-19 – Advice-related Relief) Instrument 2020/355 will be repealed on 15 October, 2020.

The ‘Urgent Advice’ measure gives providing entities additional time (30 business days instead of 5 business days) to provide a Statement of Advice (SOA) to clients in relation to urgent, time-critical COVID-19 advice.

The ‘Early Release of Superannuation’ measure grants temporary relief to:
(a) allow a licensing exemption to registered tax agents when certain conditions are met, so they can provide financial product advice to their existing clients about the early release of the client’s superannuation product or retirement savings account (RSA) product, without the need to hold an Australian financial services (AFS) licence; and
(b) allow providing entities to give financial product advice to clients about the early release of their superannuation, without the obligation to provide an SOA when certain conditions are met.

The ‘ROA for an Existing Client’ measure allows a Record of Advice (ROA) to be provided, rather than an SOA, in relation to COVID-19 advice in certain circumstances.

ASIC has also issued a temporary no-action position for superannuation trustees to expand the scope of personal advice that may be provided by, or on behalf of, the superannuation trustee as ‘intra-fund advice’. (Intra-fund advice is provided free of charge to the recipient of the advice.)

The conduct obligations for providing entities (for example, the best interests duty and related obligations in Division 2 of Part 7.7A of Chapter 7 of the Corporations Act 2001 (Act) and the record-keeping requirements in ASIC Class Order [14/923] Record-keeping obligations for Australian financial services licensees when giving personal advice) continue to apply.

ASIC gives details of regulatory work and priorities in response to COVID-19

ASIC has published details on its activities affected by the pandemic.

Amongst other things, ASIC is deferring work on its updated internal dispute resolution standard,  its Report on executive remuneration and its Review of the ePayments Code.

ASIC guidance on financial reports due dates

ASIC has announced that it will extend the deadline for unlisted entities to lodge financial reports under Chapters 2M and 7 of the Corporations Act 2001 by one month for balance dates from 31 December 2019 to 31 March 2020.

UPDATE: see ASIC Corporations (Extended Reporting and Lodgment Deadlines—Unlisted Entities) Instrument 2020/395

The extended deadlines for lodgement by unlisted entities will assist those entities whose reporting processes take additional time due to current remote work arrangements, travel restrictions and other impacts of COVID-19.

Where possible, entities should continue to lodge within the statutory deadlines having regard to the information needs of shareholders, creditors and other users of their financial reports, or to meet borrowing covenants or other obligations.

The extended deadlines will not apply for 31 December 2019 balance dates if the reporting deadline has already passed.

Listed entities
ASIC says that at present, there appear to be no widespread indications of any significant issues for the relatively small number of listed entities with 31 March 2020 balance dates in meeting their full-year and half-year financial reporting obligations.

However, ASIC will consider applications to extend the reporting deadline for individual entities in appropriate circumstances. 

Reporting periods ending after 31 March 2020
ASIC continues to assess the impact on financial reporting for balance dates after 31 March 2020, particularly at 30 June 2020. ASIC is also carefully monitoring how market conditions and COVID-19 developments are affecting financial reporting and AGM obligations for entities with 30 June 2020 balance dates.

ACCC authorises private health insurers cooperation on COVID-19 coverage and deferral of premiums

The ACCC has announced that it has granted private health insurers conditional interim authorisation to co-ordinate on providing financial relief to policyholders during the COVID-19 pandemic, and broadening insurance coverage to include COVID-19 treatment, telehealth and medical treatment provided at home.

The interim authorisation is conditional on details of proposed measures being provided to the ACCC in advance. It also excludes agreements to increase premiums and specifies that any agreements reached must terminate when authorisation ceases.

Under the interim authorisation, individual insurers will still be able to compete on price and coverage.

ACCC authorisation for life insurers cooperation on frontline workers during pandemic

The ACCC has granted interim authorisation allowing life insurers to co-ordinate to ensure frontline healthcare workers are not excluded from coverage due to potential or actual exposure to COVID-19.

The interim authorisation, granted to the Financial Services Council (FSC) and its members, means that exposure to COVID-19 cannot be used as a reason to decline life insurance coverage to a frontline health worker or to charge higher premiums or apply risk exclusions to any new policy.

The FSC members’ commitment applies to workers including, but not limited to, doctors, nurses, and all hospital workers; ambulance workers and paramedics; people working at GP surgeries or clinics; people working on COVD-19 vaccines; pharmacists; police; aged care workers and volunteers supporting people with COVID-19.

OAIC COVID-19 Privacy Guidelines

The Office of the Australian Information Commissioner (OAIC) has published FAQs for private sector employers on privacy issues related to helping to keep workplaces safe and handling personal information appropriately as part of the COVID-19 response.

The questions answered include:

  • Can we collect information from employees or visitors in relation to COVID-19?
  • Can we tell staff that a colleague or visitor has or may have contracted COVID-19?
  • Can staff work from home?
  • How can we protect personal information when working remotely?

AUSTRAC guidance on alternative KYC requirements

AUSTRAC has issued guidance on how to comply with ‘know your customer’ (KYC) requirements during the COVID-19 pandemic for businesses that use face-to-face or documentation based procedures rather than electronic verification.

Austrac has suggested that where face-to-face identification is not possible other ways that can be used to verify customers’ identity to fulfill KYC requirements include:

  • using alternative proof of identity processes such as acceptance of multiple types of secondary identification documents where normally a primary identification document would be required;
  • using electronic copies (scans or photographs) of reliable and independent documentation to verify the identity of individual customers or companies;
  •  relying on disclosure certificates to verify certain types of information about customers who are not individuals

After customers have provided copies of identification documents, additional verification could be obtained through:

  • using a video call, such as Skype, Zoom or FaceTime to compare the physical identity of a customer with scanned or photographed copies of identification documents;
  • requiring a customer to provide a clear, front-view ‘selfie’ of themselves that can be compared with the scanned or photographed copies of identification documents;
  • telephoning the customer to ask questions about their identification, their reason for requesting a designated service or other questions that would assist in ascertaining whether the customer is who they claim to be.

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David Jacobson

Author: David Jacobson
Principal, Bright Corporate Law
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.

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