Current key issues in financial services regulation

Click here to watch the video.

Hall & Wilcox Partner Vince Battaglia discusses some key current issues in financial services regulation, including ASIC enforcement priorities, the new Corporate Collective Investment Vehicle (CCIV) regime and the “gamification” of financial products.


Vince Battaglia


I think ASIC’s enforcement priorities over the next year will be tied to the significant developments in law reform over the past year. In terms of law reform developments over the past year, there have been two. One was about the new breach notification regime. ASIC said it would collect data related to reportable situations and determine what type of new market information might be found there that it would use to undertake targeted enforcement activities. As for the other key regulatory development, it relates to the Design and Carry Obligation Regime, and ASIC has stated that it will undertake targeted monitoring in relation to the implementation of this regime. This includes verifying whether the responsible entities have issued target market determinations and taken reasonable steps to ensure that investors purchasing the product are in the target market as set out in the target market determination.

With regard to managed investment schemes, there has been a movement to promote managed investment schemes as being ESG compliant and ASIC has said it will take oversight of product disclosures to see if the funds really take these ESG considerations into account or not.

The most important regulatory development is the new regime for collective investment vehicles for companies or CCIV. A CCIV is a new investment vehicle that will come into effect on July 1, 2022. It is essentially a corporate fund as opposed to a fund which is a trust-based managed investment scheme. It is a legal entity that issues shares and this will be a game changer in the Australian landscape. However, in the market, we believe there is not much incentive for fund managers to adopt this new regime and adopt CCIV for their funds as they do not believe there is a real need.

Also, there are setup costs to try to establish a new vehicle that complies with the new regime, but there will be a lot of regulatory developments on the part of the ASIC in order to adapt to the new regime and it takes congratulate yourself on it.

Another interesting development I discovered is the so-called interest in gamification in financial products. ASIC as well as IOSCO have recently described how they see trends in the issue of financial products where game theory has been introduced in relation to the distribution of financial products. This is particularly relevant for digital financial products. So just like an online betting platform, there are financial product providers that provide digital platforms where you can invest in a range of financial products on one platform and distributions are parked outside of their investments and investors reinvest in a whole range of other financial products on this platform. I guess the key policy issue is that investors don’t really think about the tax consequences of having a distribution and the other consequences of not withdrawing their money for other purposes and just reinvesting much like you would in a flat -form of online betting. ASIC and overseas regulators are looking at this and I think it’s really interesting because it shows how general game theory applied in different forums is also used in the context of the provision of financial products and services.

Stephen V. Lee