In this update we cover key Australian developments for funds managers in light of the COVID-19 pandemic – in particular, updates from the Council of Financial Regulators, new ministerial powers regarding the Corporations Act, and ASIC’s measures in response to COVID-19.
Statement by the Council of Financial Regulators on COVID-19
The Council of Financial Regulators, comprised of the Treasury, RBA, ASIC and APRA, released a statement on 16 March 2020 to outline their response to COVID-19. The regulators intend to provide a coordinated response to COVID-19’s effect on the economy.
Both ASIC and APRA intend to suspend non-essential regulatory priorities and have committed to taking a “facilitative and constructive approach” to compliance issues encountered by firms due to the impact of COVID-19. Both agencies indicate that they are prepared to provide relief or waivers from regulatory requirements where appropriate.
New ministerial power to exempt or modify obligations under the Corporations Act
On 24 March 2020, the Coronavirus Economic Response Package Omnibus Act 2020 came into force. Schedule 8 of that Act inserted a new Part 9.11 into the Corporations Act to give sweeping powers to the Treasurer to make exemptions from or modifications to any provision of the Corporations Act. The Treasurer can exercise this power:
- if an exemption or modification is necessary or appropriate to facilitate the continuation of business in circumstances relating to COVID-19 or to mitigate COVID-19’s economic impact; or
- where it would not be reasonable to expect compliance with a provision because of the impact of COVID-19.
Mandatory conditions may be attached to exemptions or modifications. These powers can only be used until 25 September 2020 and any exemption or modification so made may last up to six months.
ASIC announces measures in response to COVID-19
As noted in item 1 above, ASIC has announced that it has suspended all non-essential enforcement activity until at least 30 September 2020 and intends to provide accommodation, relief or waivers from regulatory requirements where necessary (20-070MR).
ASIC will focus its regulatory efforts on challenges created by the COVID-19 pandemic. Until at least 30 September 2020, ASIC will also give priority to matters where there is a risk of significant consumer harm, serious breaches of the law, risks to market integrity and time-critical matters.
ASIC has issued guidelines to help companies with 31 December balance dates respond to holding AGMs in remote working environments (20-068MR). ASIC will not take action if AGMs due to be held by 31 May 2020 are held virtually or are postponed for two months (until the end of July). While no action will be taken under the Corporations Act, care should be taken to ensure that AGMs held using virtual technology comply with the entity’s constitution.
ASIC is also monitoring COVID-19’s impact on financial reporting obligations, but no changes have been announced.
ASIC has also indicated that it seeks to ensure the equity markets remain resilient in light of the record trading volumes and exponential increases in the number of trades executed (20-062MR). Accordingly, ASIC has issued directions to a number of large equity market participants to reduce the number of trades executed daily. High volume participants and their clients will need to actively monitor their trading activity.
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2021