A pivotal week in regulation saw the entire financial services sector enter a new era of heightened operational accountability as APRA’s landmark risk management standard, CPS 230, officially came into force. The implementation of this major compliance framework coincided with the corporate regulator, ASIC, launching significant new investigations into the booming private credit sector and the role of platforms and research houses in product failures. This dual focus on embedding existing rules while simultaneously probing emerging risks signals an intensification of regulatory oversight, backed by a continued campaign of decisive enforcement actions against non-compliant firms and individuals.
New Era of Operational Resilience Begins as CPS 230 Goes Live
A new chapter in prudential regulation began on 1 July as the Australian Prudential Regulation Authority's (APRA) Prudential Standard CPS 230 on Operational Risk Management took effect. The standard imposes significantly stronger and more detailed obligations on all banks, insurers, and superannuation funds to manage operational risks, ensure business continuity, and oversee their third-party service providers. In a stern warning to the industry, APRA stated it expects no "cutting corners" with the new rules, which are designed to bolster the financial system's resilience against disruption. To support the implementation, the regulator has released the finalised notification forms that entities must use to report material operational incidents and update APRA on their critical operations. This move comes as a new survey reveals that cybersecurity is now the biggest concern for both super funds and banks, validating the regulator's focus on operational and technological resilience.
While APRA rolled out its new standard, the Australian Securities and Investments Commission (ASIC) provided some practical relief to licensees, extending transitional arrangements for certain aspects of the reportable situations regime. ASIC has also been active in market-wide guidance, releasing updated information for managed investment schemes and seeking feedback on the regulation of employee redundancy funds.
Regulators Target New Frontiers: Private Credit, Platforms, and Retirement
ASIC has signalled a clear strategic pivot towards emerging areas of risk, launching major new probes into some of the fastest-growing corners of the market. The regulator is set to scrutinise the booming private credit sector, with its investigation expected to focus on the retail space, product disclosure statements, and target market determinations (TMDs). This inquiry aims to ensure that the risks associated with these complex products are being communicated clearly to consumers.
In a move with wide-ranging implications for wealth management, ASIC also confirmed it is investigating the role of investment platforms and research houses in recent high-profile product failures. The investigation will examine the due diligence processes and the influence these intermediaries have on the distribution of investment products to retail clients.
At the same time, APRA has turned its supervisory lens onto the decumulation phase of superannuation. For the first time, the regulator has published performance data for a range of retirement products. The release provides unprecedented transparency on how these products are performing for retirees and comes amid commentary that three years after the introduction of the Retirement Income Covenant, the industry still has a long way to go to solve the retirement income challenge.
A Broad Sweep of Enforcement Actions Continues
ASIC maintained its assertive enforcement posture with a series of actions across multiple sectors. In a significant move, the regulator cancelled the Australian Financial Services Licence (AFSL) of Ballast Financial Management Pty Ltd for failing to meet its obligations as a licensee. Demonstrating its focus on market integrity, ASIC also launched legal action against Delta Power and Energy Vales Point Pty Ltd for alleged manipulation of the futures market.
The regulator’s focus on gatekeepers continued, with the auditor of the failed firm Brite Advisors admitting to significant failures and surrendering his registration. On the consumer protection front, ASIC is suing payday lender CashnGo, alleging it engaged in unconscionable conduct in its debt recovery practices. Basic corporate compliance also remained a priority, with ASIC seeking court orders to compel companies within the GFG Alliance group to lodge outstanding financial reports.
Context and Looking Ahead
This week marks a tangible shift in the regulatory landscape. While the lead-up to 1 July was about preparing for CPS 230, its implementation moves the focus to active compliance and supervision. The simultaneous launch of new ASIC probes into private credit and platforms indicates that the regulators are not just policing past failures but are actively trying to get ahead of emerging risks in high-growth sectors. The new layer of transparency in retirement products from APRA will undoubtedly drive product evolution and competition.
Looking ahead, the entire financial sector will be under pressure to demonstrate robust compliance with CPS 230. The outcomes of ASIC’s new investigations will be keenly watched and have the potential to reshape product design and distribution standards. Ongoing policy debates around the Life Insurance Framework and the funding of the Compensation Scheme of Last Resort (CSLR) will also continue to shape the operating environment for advisers and product providers.
Key Takeaways:
- For all APRA-regulated entities (Short-term, 0-3 months): Ensure full and demonstrable compliance with CPS 230, which is now in effect. This requires an immediate focus on testing incident response plans, finalising third-party supplier risk assessments, and being prepared to use the new mandatory notification forms.
- For Asset Managers in Private Markets (Short-term, 0-3 months): Immediately review all retail product disclosures and target market determinations in direct response to ASIC's new probe into the private credit sector.
- For Platforms and Research Houses (Short-term, 0-3 months): Prepare for scrutiny from ASIC by reviewing and documenting due diligence processes for product inclusion and recommendation, as the regulator commences its investigation into the role these intermediaries play in product failures.
- For Superannuation Trustees (Medium-term, 3-12 months): Use APRA's new retirement product performance data to benchmark existing decumulation strategies and accelerate the development of innovative solutions to meet the needs of retirees.
