Welcome to the latest issue of the KHQ Super Alert. This week, ASIC released draft regulatory guidance relating to sustainability reports and a new Bill was introduced to Parliament which proposes further financial advice reforms.

ASIC – Consultation on sustainability reporting regime guidance

On 7 November 2024, ASIC commenced a consultation process in relation to a proposed new Regulatory Guide to be called Sustainability reporting. As referred to in our Super Alert of 23 August 2024, a result of changes made to the Corporations Act 2001 (Cth) by the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 (Cth) is that climate reporting will be mandatory for large Australian businesses including RSE licensees. These entities will be required to prepare annual sustainability reports containing climate-related financial disclosures.

The draft Regulatory Guide proposes to provide ‘guidance on who must prepare a sustainability report, how the regime will interact with existing legal obligations and how ASIC will administer the sustainability reporting requirements’. ASIC Commissioner Kate O’Rourke said: ‘We want industry to engage with our draft guidance and what we are proposing. Their feedback will help us to ensure that we can effectively support the implementation of the sustainability reporting regime’.

The consultation period closes on 19 December 2024.

Click here for details.

Federal Court – ASIC’s proceedings against former company director dismissed

On 6 November 2024, the Federal Court handed down its decision in Australian Securities and Investments Commission v Ryan [2024] FCA 1267. This judgment related to proceedings that ASIC had commenced in 2023 against a former company director for alleged breaches of directors’ duties. The alleged breaches occurred at a time when the company was ‘nearing insolvency’ as resolutions were alleged to have been passed which ‘materially prejudiced [the company’s] ability to pay its creditors’.

The Federal Court dismissed ASIC’s case against the director and found that the allegations that the director contravened sections 180, 181 or 182 of the Corporations Act 2001 (Cth) were not made out. In an associated media release, ASIC Deputy Chair Sarah Court said ‘ASIC remains committed to taking enforcement action where appropriate and expects directors to meet their governance obligations, including where they serve on the boards of multiple companies in a corporate group’.

Click here and here for details.

Parliament – Introduction of the Corporations Amendment (Streamlining Advice Process) Bill 2024 (Cth)

On 4 November 2024, the Corporations Amendment (Streamlining Advice Process) Bill 2024 (Cth) was introduced to the House of Representatives. According to the Explanatory Memorandum, ‘[t]he Bill aims to streamline the engagement process between a financial adviser and their client’ by providing for:

• ‘the creation of a clear and concise Letter of Engagement, prior to any financial advice being provided’; and
• a ‘streamlined Record of Advice supplied to the client by a providing entity’.

These changes to the Corporations Act 2001 (Cth) were recommended as part of the Quality of Advice Review. Assuming the Bill is passed, the legislation will take effect the day after it receives Royal Assent.

Click here for details.

Federal Court – AFCA determination upheld in relation to insurer’s responsibility to pay compensation

On 1 November 2024, the Full Court of the Federal Court handed down its decision in Resolution Life Australasia Limited v Teagle [2024] FCAFC 140. As referred to in our Super Alert of 2 February 2024, a single judge of the Federal Court had earlier this year rejected the insurer’s appeal of the relevant AFCA determination and also ordered the insurer to pay AFCA’s costs. The original AFCA complaint related to a TPD benefit decline by the insurer (on the basis that an exclusion applied) and the relevant superannuation trustee agreed with the insurer’s decision.

On appeal, the insurer sought to set aside the Federal Court’s decision on the basis that AFCA lacked the requisite jurisdiction to make the relevant finding. The Full Court of the Federal Court dismissed the appeal, ultimately finding ‘that AFCA was indeed within its jurisdiction’ because ‘AFCA’s role is to determine fairness and reasonableness, and…its reasons should be read fairly and broadly’.

Click here for details.

ASFI – Second round of consultation on the development of an Australian sustainable finance taxonomy

On 30 October 2024, the Australian Sustainable Finance Institute (ASFI) launched ‘the second and final round of public consultation on the development of an Australian sustainable finance taxonomy’. According to the ASFI, this second round seeks public feedback on:

• ‘[t]he climate change mitigation criteria for all six priority sectors for development’;
• ‘a Do No Significant Harm framework’;
• ‘minimum social safeguards’; and
• ‘ways in which the taxonomy can be used’.

The consultation period closes on 1 December 2024.

Click here for details.