The month of May brought a lower number of material regulatory and industry updates due to the Australian federal election. ASIC canceled the registration of a number of SMSF auditors for failing to lodge their annual statements. In superannuation, APRA published its Quarterly Superannuation Performance publication and Quarterly MySuper Statistics Report, which provides material superannuation statistics for the March 2022 quarter.
The Federal Court determined that the obligations of an Australian Financial Services licensee to act efficiently and fairly extended to managing cybersecurity risk, and also handed down its decision in Argo Managing Agency Ltd for and on behalf of the underwriting members of Lloyd’s Syndicate 1200 v Quintis Ltd (subject to deed of company arrangement) [2022] FCAFC 86.
1 Court finds licensee failed to adequately manage cybersecurity risks
For the first time in Australia, the Federal Court has found that the obligations of an Australian Financial Service licensee to act efficiently and fairly extend to adequately managing cybersecurity risk. In this case, the court found that an Australian Financial Services licensee was in breach for failing to implement adequate risk management systems to manage its cybersecurity risks.
ASIC commenced proceedings following multiple significant cyber incidents that occurred between June 2014 to May 2020 at the authorized representatives of the licensee. In one of the incidents, the malicious agent was able to remain undetected for a significant period of time which resulted in the potential compromise of several thousand client files.
This case provides a useful illustration of how the reforms introduced on 13 March 2019 as a result of the Financial Services Royal Commission, extend to cyber risk. It signals increased scrutiny of cyber risk management by the regulator and willingness to enforce non-compliance.
Further information can be found here and the judgment can be accessed here.
2 ASIC acts against SMSF auditors who failed to lodge annual statements
ASIC has canceled the registration of 10 SMSF auditors for failing to lodge their annual statements, having recently informed all SMSFs auditors with outstanding annual statements that their registration may be canceled if they are non-compliant. This is a timely reminder for auditors of SMSFs that the lodgement of annual statements is a strict requirement under the Superannuation Industry (Supervision) Act 1993 (SIS Act).
Further information can be found here.
3 APRA releases quarterly and annual statistics
APRA released its March 2022 Quarterly General Insurance Performance Statistics, Quarterly General Insurance Institution-level Statistics, Quarterly Life Insurance Performance Statistics, and its Quarterly Private Health Insurance (PHI) publications.
APRA also released its annual general insurance institution-level statistics.
Further information can be found here for the general insurance statistics, here for the life insurance statistics, here for the PHI statistics and here for the annual general insurance institution-level statistics.
4 APRA releases superannuation statistics for March 2022
APRA released its superannuation statistics for the March 2022 quarter. The statistics illustrate a 9.7% increase in the aggregate total of superannuation assets for the year ending March 2022. This increase is attributed by APRA to strong investment performance and the implementation of COVID-19 fiscal stimulus packages during this period. Additionally, benefit payments declined by 23.8% for the year ending March 2022. This reflects the termination of the Early Release Scheme.
Further information can be found here.
5 APRA proposed supervisory levy for the PHI industry for 2022-23
APRA issued a letter to the PHI industry regarding a proposed supervisory levy for 2022-23.
It is expected that Treasury will shortly release the Proposed Financial Institutions Supervisory Levies for 2022-23 discussion paper for industry consultation.
Further information can be found here and the letter can be found here.
6 Full Federal Court allows appeal in Argo Managing Agency Ltd for and on behalf of the underwriting members of Lloyd’s Syndicate 1200 v Quintis Ltd (subject to deed of company arrangement) [2022] FCAFC 86
The Full Federal Court has allowed the appeal in Argo Managing Agency Ltd for and on behalf of the underwriting members of Lloyd’s Syndicate 1200 v Quintis Ltd (subject to deed of company arrangement) [2022] FCAFC 86. The appeal concerned rectification of an insurance contract underwritten by various syndicates in the Lloyd’s market. At first instance, the primary judge found the Side C coverage underwritten by two insurers should be rectified, significantly increasing the policy limit from 10 million (as stated in the policy) to $ 50 million. Rectification was ordered on the basis that the insurers held the ‘Side C Coverage Intention’.
The two insurers have been successful on appeal. The Full Federal Court has overturned the finding that these two insurers held the ‘Side C Coverage Intention’ based on an overall weighting of the evidence.
The judgment can be found here.