Fund Product, Company and Regulatory Updates as at 26 February 2019

Company Updates

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JP Morgan announces new digital currency for institutional investors
The blockchain and digital currency is now part of JP Morgan’s institutional investment platform, creating the possibility to make instant payments. JPM Coin is a currency whereby investors can make payments between one another, being redeemable for US dollars.

A trial is to be rolled out for a small portion of its funds. The JPM Coin reduces settlement times and reduces risk and capital requirements. The Quorum Blockchain is being used for the coin, but is to be extended to other platforms and currencies over time.

Regulatory Updates

New superannuation laws passed in the Senate
Two superannuation bills have passed the Senate to help prevent unnecessary fees reducing superannuation balances. A big change is the automatic consolidation of inactive accounts under $6,000 from 1 July. The technology to consolidate these balances has been available for some time, however legislation has not required it, meaning the onus falls on consumers.

Explicit changes were not made, however, to protect young people and those with low balances from unnecessary insurance. The other Bill passed puts greater focus on those super funds that cost a lot, and perform poorly.

Fight to remove controversial weapons from global indices joined by Aussies
Australian institutional investors have joined in the lobbying for index providers to take out controversial weapons from global indices. These weapons include anti-personnel cluster mines, cluster munitions, biological and chemical weapons, and nuclear weapons.

Key superannuation funds have signed an open letter stating that active and passive investments should, by default, exclude these types of weapons. Over 140 institutional investors have signed the letter, written by Swiss Sustainable Finance, and the letter was sent to chief executives and chairs of all major index providers and the Index Industry Association this month.

HSBC’s EU concluded
ASIC has finalised the enforceable undertaking (EU) of HSBC Bank Australia Limited, entered into by the bank in 2016. The surveillance was implemented by ASIC when the scope of financial advice provided by HSBC financial advisers was limited to one single HSBC structured product, with advisers having little to no information on client circumstances (assets, liabilities, income, or debts) before providing such advice. In some cases there appeared to be little evidence that the advice was appropriate for the client.

HSBC has stopped offering structured products to retail clients, and a remediation program was put in place to compensate customers who lost money due to inappropriate advice. Eighty-two of 510 structured product advice files were examined and found to contain inappropriate advice, totalling almost $700,000. HSBC no longer provides personal financial advice.

New powers by ASIC to punish banks more harshly
ASIC will soon be able to seek harsher penalties for banks and their executives, both civil and criminal, with a new Bill passed in the Senate. The bill strengthens existing penalties while also adding new penalties for breaches of corporate law.

Key features of the new Bill include:

  • Serious offences maximum prison sentences increased to 15 years (breach of director’s duties, false or misleading disclosure and dishonest conduct)

  • Civil penalties for companies is now capped at $525 million

  • Civil penalties for individuals increases to $1.05 million and may take profits into consideration

  • Civil penalties are to apply to more misconduct, including a licensee failing to act efficiently, honestly and fairly, and failing to report breaches and defective disclosure