Ms. Armour joins the Cboe Australia board after a decorated career as a financial services legal expert, including almost a decade as Commissioner of the Australian Securities and Investments Commission (“ASIC”).

Across her career of more than 30 years, Ms. Armour has served as General Counsel of Macquarie Capital, and J.P. Morgan Australia, and was an Executive Director of Macquarie Group.

While an ASIC Commissioner, she worked closely with the ASIC teams responsible for regulating market infrastructure, market surveillance, supervision of market intermediaries and the enforcement of laws relating to market integrity.

Cboe Australia Chairman, Ade Cordell said: “We are delighted to welcome Cathie to the Cboe Australia board. Cathie’s combined experience as a senior markets regulator, and general counsel to large financial services organisations is unsurpassed.”

“As Cboe Australia continues to pursue its strategy of improving and growing the securities and derivatives markets in Australia and the Asia Pacific, Cathie’s experience will prove invaluable.”

Cathie Armour said: “Cboe Australia is a lead innovator in Australian markets, and I’m excited to contribute to the business’ ongoing growth and success.”

Ms. Armour holds a Bachelor of Economics and a Bachelor of Laws (Hons) from the Australian National University, and a Master of Laws from Sydney University. She is also a Graduate of the Australian Institute of Company Directors (“GAICD”) and is a member of Chief Executive Women.

Ms. Armour’s appointment follows the retirement of David Trude from the Cboe Australia board, effective 31 March 2023.

Mr. Trude commenced as an Independent Director of Chi-X Australia prior to its market launch in 2011, and has Chaired the Cboe Compliance and Audit Committees. Mr. Trude has played an instrumental role in Chi-X and Cboe Australia’s growth and success to date.

Over a career of more than 40 years within the banking and securities industries, Mr. Trude served in several high-profile roles, including more than a decade as Managing Director of Credit Suisse in Australia, and nine years as Chairman of Baillieu Holst Limited.

Mr. Trude currently serves as Chairman of Waterford Retirement Village, Hansen Technologies, and East West Line Parks Pty Ltd, and is a Non-Executive Director of ASX-listed Acorn Capital Investment Fund Limited, and MSL Solutions.

Cboe Australia Chief Executive Vic Jokovic said: “On behalf of Cboe Australia and Cboe Global Markets, I thank David for his service to the business as Non-Executive Director and Chair of the Cboe Australia Compliance and Audit Committees for more than a decade. He has been integral to the success of Chi-X and now Cboe Australia, and we wish him every success in his future.”

David Trude said: “It has been an honour to have been part of the Cboe Australia journey. I have worked with some of the most exceptional and well-respected individuals within our industry, in particular the late Peter Fowler, who as the then Chi-X Australia’s first CEO, was a pioneer in successfully launching genuine competition between Australia’s market operators.”

Mr. Trude continued: “His legacy is strong within the company as it solidifies its position as one of the world’s most innovative exchanges by maintaining its focus on best-in-class technology, product innovation and client service.”

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ASIC Commissioner Cathie Armour said, ‘The way investors access information is changing. It is crucial that influencers who discuss financial products and services online comply with the financial services laws. If they don’t, they risk substantial penalties and put investors at risk.’

In 2021, the ASIC young people and money survey found that 33% of 18-21 year olds follow at least one financial influencer on social media. The survey found a further 64% of young people reported changing at least one of their financial behaviours as a result of following a financial influencer.

INFO 269 Discussing financial products and services online:

• highlights activities where influencers may contravene the law if they are unaware of the legal requirements, using a series of practical examples on:
  • financial product advice
  • dealing by arranging
  • misleading or deceptive conduct
• explains issues for influencers to consider including:
  • whether an AFS licence is needed
  • being familiar with relevant regulatory guidance
  • doing their due diligence on people who are paying them (including non-monetary benefits)
• reminds AFS licensees who use influencers to:
• do their due diligence
• have appropriate risk management systems and monitoring processes
• have sufficient compliance resourcing to monitor the influencers they use
• consider their design and distribution obligations.

‘ASIC monitors select online financial discussion by influencers who feature or promote financial products for misleading or deceptive representations or unlicensed advice or dealing. If we see harm occurring, we will take action to enforce the law,’ concluded Ms Armour.

Background

The licensing provisions under the Corporations Act 2001 (the Act) apply to persons who provide financial product advice or arrange for a person to deal in a financial product when carrying on a financial services business. Carrying on an unlicensed financial services business is an offence under the Act, unless authorised as a representative of a licensee or relying on an exemption.

The Act imposes significant penalties, including up to five years’ imprisonment for an individual and financial penalties into the millions of dollars for a corporation.

The law also prohibits conduct that is misleading or deceptive, or is likely to mislead or deceive, in relation to financial products or services. An influencer does not need to be licensed to breach the misleading or deceptive provisions.

In 2020 and 2021, ASIC conducted two Young People and Money surveys to better understand the challenges young people are facing. The survey responses provide new insight into how young Australians learn about, engage with and feel about their finances.

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The report highlights some of the activities undertaken to safeguard Australia’s financial markets, so investors can continue to participate with confidence.

Key outcomes during the six-month period include:

The report looks at ASIC’s recent focus on high-frequency trading, changes to reporting requirements, and enhanced supervision and onsite reviews. It also looks at some of our key activities over the last six months in areas such as BBSW surveillance, FX margin practices, and misleading ICOs and crypto-asset funds.

ASIC Commissioner Cathie Armour said, ‘Maintaining the integrity of Australia’s financial markets is crucial to a prosperous economy. At ASIC, we do this by setting standards and educating stakeholders, pursuing behavioural change and taking enforcement action to disrupt market misconduct.’

ASIC’s markets team will continue to focus on the following existing and emerging risks.

1. Conduct governance
2. Technology risk and resilience
3. Effective capital markets

Read the report.

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LIBOR (London Interbank Offered Rate) is deeply embedded in financial markets globally and is used by many Australian financial institutions in their contracts and business processes. The UK Financial Conduct Authority (FCA) has stated that it will no longer use its powers to sustain LIBOR beyond 2021.

The purpose of the letters is to better understand how major Australian financial institutions are preparing to transition away from LIBOR to alternative benchmarks. ASIC, APRA and RBA are seeking assurance that the senior management in these institutions fully appreciates the impact and risks and is taking appropriate action ahead of the end of 2021.

More broadly, the financial regulators expect all institutions that currently rely on LIBOR to consider the impact of LIBOR transition on their business. In particular, users of LIBOR should:

• be aware of the size and nature of their exposures to LIBOR;
• put in place robust fall-back provisions in contracts referencing LIBOR; and
• be taking action to transition to alternative rates.

ASIC Commissioner Cathie Armour said, ‘We encourage all firms that may have exposure to LIBOR to assess the extent of their use of LIBOR and to take timely action to plan for a world in which LIBOR is no longer available.’

RBA Deputy Governor Guy Debelle said, ‘Financial regulators around the world expect institutions using LIBOR to be ready to transition to more robust benchmarks. If they haven’t already done so, users need to identify their exposures to LIBOR now and be working on transitioning to alternative rates.’

The example letter at the link below may assist readers in considering how the transition from LIBOR may impact them.

Read the letter.

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Retail OTC derivatives are highly risky. Regulators in many jurisdictions (such as Europe, Japan, North America and China) have restricted or prohibited the provision to retail investors of certain OTC derivatives, such as binary options, margin foreign exchange and other contracts for difference (CFDs) to mitigate harm to retail investors.

AFS licensees are on notice that in addition to overseas consequences of potential breaches of overseas law, ASIC will consider whether breaching overseas law is consistent with obligations under Australian law to provide services ‘efficiently, honestly and fairly’. ASIC will also consider whether AFS licensee are making misleading or deceptive statements about the scope or application or effect of an AFS licence.

Commissioner Cathie Armour said, ‘AFS licensees offering OTC derivatives to overseas retail clients should, as a matter of priority, seek advice on the legality of their offerings to these clients. Any non-compliant activities should cease immediately and be notified to ASIC and the relevant overseas authorities.’

Developments in China and Europe

Chinese authorities have informed ASIC that: ‘some online platforms are illegally engaged in forex margin trading activities.’

Specific legal provisions have been implemented in China providing that ‘any unauthorized institution that conducts forex margin trading without approval [in China] shall be deemed to be in violation of the law.  It is also illegal for any client (entity or individual) to entrust an unauthorized institution to conduct forex margin trading.’

Authorities in China have advised that no institution or agency has approval to carry out margin foreign exchange trading in China. AFS licensees with China-based clients may be conducting unlicensed or illegal activities in China if they are providing margin foreign exchange products to retail clients in China.

Temporary product intervention measures have recently been extended in Europe by the European Securities and Markets Authority (ESMA) (see here and here). Authorities in the United Kingdom and Germany have announced permanent measures.  They include anti-avoidance provisions.

ASIC is concerned that some OTC derivative issuers that hold AFS licenses (or their agents) may be marketing or soliciting clients located in China, Europe and other jurisdictions to open accounts with Australian-based AFS licensees on the basis doing so will avoid the overseas intervention measures.

Commissioner Armour said: ‘AFS licensees who break the law in overseas jurisdictions, or who mislead retail investors about their services undermine the integrity of the Australian licensing regime. ASIC will not tolerate that conduct.’

Background

Binary options are financial products largely used by retail consumers to ‘bet’ on an event. The potential outcome is binary, with consumers usually either losing the initial investment in full if their prediction is incorrect or receiving a fixed pay-out if they are correct.

CFDs are leveraged financial products that consumers use to speculate on the rise and fall in prices of underlying assets, such as foreign exchange, shares and crypto assets.

ASIC’s June 2018 Report 579 on Improving practices in the retail OTC derivatives sector, highlights our concerns with this sector. There are very concerning practices with misleading marketing materials, unclear pricing methodologies, inadequate risk management practices, inadequate monitoring of counterparties and inappropriate referral arrangements. The report also shows that the majority of consumers’ trading in these products is unprofitable.

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ASIC sent a letter in July to each organisation and individual’s company’s registered office address. This letter advised how to provide industry funding contact details and submit business activity metrics in the new ASIC Regulatory Portal by 27 September 2018. ASIC will use this information to calculate invoices.

Entities that have the letter from ASIC should act now and follow the simple steps outlined to complete the process. Those that do not have their letter are still able to fulfil their obligations. ASIC’s website at www.asic.gov.au has the details on what they need to do by 27 September.

ASIC Commissioner Cathie Armour thanked the thousands of people who have already completed the process.

‘We are all settling in to this new funding model and your attention and time toward completing the process is appreciated,’ Cathie said. ‘The deadline is a few days away and we are urging the rest of our industry stakeholders to act now and complete the process online.’

Most small proprietary companies or registered charities are not required to submit data.

Small proprietary companies only need to visit the portal if they operate in a financial services industry sector regulated by ASIC. The Government will absorb ASIC’s costs of regulating charities. Those charities registered with the Australian Charities and Not for Profits Commission (ACNC) are also not required to visit the portal to submit business activity metrics.

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ASIC Commissioner Cathie Armour said, ‘This is another significant step in ensuring continued market confidence in Australian financial benchmarks, so that they remain robust and reliable. The public can be confident that these critical benchmarks will be subject to the highest international standards of oversight.’

These actions by ASIC include:

• declaring certain financial benchmarks to be significant
• writing rules to support the implementation of a licensing regime for the administrators of significant benchmarks, and
• allowing ASIC to, by written notice, require the continued administration of a significant benchmark or compel submissions to a significant benchmark.

The rules, declaration and regulatory guide are available on ASIC’s website.

The measures are also important in aligning financial benchmarks in the Australian economy with the IOSCO Principles for Financial Benchmarks. The rules are also expected to facilitate equivalence assessments under overseas regimes, including the European Benchmarks Regulation.

These steps follow passage through the Parliament in March of legislation that provide for a robust licensing framework for significant benchmark administrators in Australia. As is the case in a number of other jurisdictions, these legislative reforms make manipulation of any financial benchmark, or products used to determine such a benchmark, a specific offence and subject to civil and criminal penalties.

This follows the implementation of new BBSW methodology, with the benchmark now calculated directly from market transactions during a longer rate-set window and involving a larger number of participants (see 18-144MR).

Download

• Financial benchmarks rules and declaration
• Regulatory Guide 268 Licensing regime for financial benchmark administrators

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The guidance coincides with the start of ASIC’s Client Money Reporting Rules 2017 (client money reporting rules) and other client money reforms on 4 April 2018 enacted under the Treasury Laws Amendment (2016 Measures No. 1) Act 2017 and the Corporations Amendment (Client Money) Regulations 2017.

ASIC Regulatory Guide 212 Client money relating to dealing in OTC derivatives (RG 212) has been updated to reflect the changes to the law as a result of these reforms.

The changes mean that the circumstances in which an AFS licensee may use ‘derivative retail client money’, within the meaning of the Corporations Act, have been significantly restricted. In particular, AFS licensees can no longer withdraw derivative retail client money from the client money account and use it for a wide range of purposes, including as the licensee’s own working capital.

The reforms also impose new record-keeping, reconciliation and reporting requirements on AFS licensees that hold derivative retail client money (unless the client money relates to a derivative that is traded on a fully licensed domestic market, such as ASX 24).

ASIC Commissioner Cathie Armour said, ‘The amendments to the client money regime enacted by Parliament have strengthened the protection of derivative retail client money and will help to increase investor confidence in the Australian financial system.

‘ASIC’s client money reporting rules will also ensure greater transparency in relation to an AFS licensee’s receipt and use of derivative retail client money and will ensure any discrepancies in an AFS licensee’s client money account are notified to ASIC in a timely manner and enable ASIC to take appropriate action.

‘ASIC has engaged with industry and there has been a sufficient  transition period to ensure that AFS  licensees that hold derivative retail client money are aware of the new regime and understand the obligations it imposes. From 4 April 2018, we expect licensees to know and comply with the new client money regime’, Ms Armour said.

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The enforcement outcomes over that six-month period include:

The report presents a number of key outcomes over the last six months, across the areas that ASIC enforces: corporate governance, financial services, market integrity and small business. These outcomes relate to a range of areas of focus, including:

Corporate governance

• Holding gatekeepers to account (Bradley Sherwin, Patrick Godfrey)

Financial services

• Dishonest, misleading and deceptive conduct (Shane Thompson)
• Protecting investors and consumers (NSG Service Pty Ltd)
• Tackling loan fraud (Najam Shah and Myra Home Loans)

Market integrity

• Financial markets benchmarks (BBSW – ANZ and NAB)
• Continuous disclosure (MG Responsible Entity Limited)
• Market integrity rules (Bell Potter Securities Limited)

Small Business

• Illegal phoenix activity (James Meaden)

This edition of the report also provides a summary of ASIC’s work  tackling loan fraud. Since becoming the national consumer credit regulator in 2010, ASIC has undertaken over 100 investigations into loan fraud, and removed or restricted 60 people from providing financial services, of which 36 people were banned permanently.

Outlined in the report are key risk areas that will be the focus of our enforcement activities over the next six months. These include, but are not limited to:

• insolvency practitioners and others who facilitate serious illegal ‘phoenix’ activity and improper transactions in the face of insolvency;
• company directors and officers who fail to stop their companies making illegal payments to officials of overseas governments;
• responsible lending practices in the consumer credit industry; and
• technology-enabled offending and/or cyber crime activity in the context of rapid technological developments.

ASIC Commissioner Cathie Armour said, “This report highlights our ongoing commitment to ensuring that Australians can have trust and confidence in the financial system. Where there are practices in our markets and financial services industry that could create harm, ASIC will take enforcement action to protect investors and consumers.”

Download the report

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Report 555 Cyber resilience of firms in Australia’s financial marketscollates and analyses the results of self-assessments from over 100 stockbrokers, investment banks, market operators, post-trade infrastructure providers and credit rating agencies.

ASIC Commissioner Cathie Armour said, ‘Cyber resilience is now widely regarded as one of the most significant concerns for the financial markets sector and the economy at large. Given the central role financial markets firms play in our economy, the cyber resilience of our regulated population is a key focus for ASIC.

‘While our report shows greater engagement by firms on the issue, there is disparity between firms and insufficient investment in cyber resilience measures.

‘Cyber resilience is not just an IT issue but one that requires a whole-of-organisation response. The dynamic nature of cyber threats requires a comprehensive and long-term commitment to cyber resilience by all organisations operating in the Australian economy’, Ms Armour said.

Report 555 is designed to:

• raise awareness of cyber risks
• highlight existing good practices and areas for improvement
• monitor and assess the cyber preparedness of financial markets firms.

Key insights from the assessments include the following:

• There is a growing understanding that cyber risk is a strategic, enterprise-wide issue that is on all organisations’ radars and is attracting increasing investment.
• The disparity between large firms and small-and-medium firms is reflective of their investment in cyber security, the period of time cyber security has been an investment priority, and the ability to acquire highly specialised skills.
• Larger firms have demonstrated a relatively high degree of cyber resilience.
• Small-and-medium firms are working towards developing their cyber resilience by investing in cyber security, but there is a long way to go.

ASIC will continue to monitor, assess and measure improvements over time by:

• engaging and collaborating with regulated firms, other regulators and Government
• raising awareness of cyber risks in the financial markets sector and highlighting good practices and areas for improvement
• assessing the cyber resilience of regulated firms and measuring their progress against their targets.

ASIC encourages all financial markets firms to consider and discuss the information in this report as they develop or enhance their cyber resilience frameworks.

Read Report 555

Background

Report 555 builds on ASIC’s cyber resilience assessment of the ASX and Chi-X markets in Report 468 Cyber resilience assessment report: ASX Group Ltd and Chi-X Australia Pty Ltd, published in April 2016.

To help firms operating in Australia’s financial markets improve their cyber resilience, ASIC has published a number of resources on its website, including good practice guidance and key questions for boards to ask about their firm’s cyber resilience.

Visit ASIC’s cyber resilience webpage.

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