Regulators took an assertive and wide-ranging stance this week, launching a formal inquiry into the ASX's core operations while publicly admonishing the superannuation sector for governance failures and putting private asset valuations under the microscope. The forceful interventions from ASIC and APRA signal a clear focus on bolstering market integrity and board-level accountability. This regulatory crackdown unfolded against a persistent political debate over the government's proposed Division 296 tax on high-balance superannuation accounts, which the Treasurer has defended as a critical test case for meaningful economic reform.
Industry Updates
Regulatory Developments
The Australian Securities and Investments Commission (ASIC) has significantly intensified its oversight of critical market infrastructure, launching a formal inquiry into the ASX. The investigation will examine the adequacy of the ASX's governance and risk management frameworks, particularly in light of the now-abandoned CHESS replacement project.
ASIC also turned its attention to the superannuation sector, with Chair Joe Longo declaring the regulator was "reading the riot act" to trustees over governance and expenditure. In a direct address, he warned of board-level blind spots and emphasised that trustees must listen and act on member concerns. This was complemented by warnings from Commissioner Simone Constant regarding private credit fees and valuation practices.
Enforcement activity was robust. ASIC moved against 18 ‘finfluencers’ as part of a global crackdown on unlicensed advice, cancelled the AFSL of Financial Services Group Australia over its links to failed schemes, and banned a former adviser for 10 years over a crypto scam. Meanwhile, the Australian Prudential Regulation Authority (APRA) proposed significant changes to the capital framework for annuity products, aiming to scrap the "one-size-fits-all" approach to encourage innovation in retirement income products.
Economic Updates
While there were no major economic data releases this week, regulatory leaders framed their actions within the broader context of monetary stability. In a speech to the Business Council of Australia, APRA Chair John Lonsdale stressed that a resilient and stable financial system is a prerequisite for economic prosperity. He highlighted that APRA's focus on governance and risk management is designed to ensure financial institutions can withstand economic shocks. Similarly, Treasurer Jim Chalmers positioned the controversial Division 296 super tax as a measure for improving the long-term sustainability of the budget and the tax system's fairness, arguing it is a test case for real reform that strengthens the nation's economic foundations.
Legislative & Political Updates
This week's political debate was dominated by the government's defence of its proposed Division 296 tax on superannuation balances exceeding $3 million. In a Sky News interview, Treasurer Jim Chalmers reiterated the government's commitment to the policy, framing it as a matter of structural budget repair and equity. He confirmed that taxing unrealised gains remains a core component of the proposal, which continues to face pushback from industry and opposition parties. Looking ahead, advisers are being urged to prepare for the upcoming Delivering Better Financial Outcomes (DBFO) reforms, which will introduce new informed consent obligations for risk advice.
Industry Responses
In response to the growing scrutiny of unlisted assets, market participants have called for clearer principles on valuation practices to ensure consistency and transparency. Superannuation funds have also voiced concerns about increasing regulatory complexity, with Australian Retirement Trust (ART) warning against the dangers of regulatory overlap, which can drive up member costs. The role of the Australian Financial Complaints Authority (AFCA) also came into focus, with the Financial Advice Association of Australia (FAAA) supporting AFCA's power to name firms that ignore its determinations. However, the FAAA and other industry voices simultaneously warned against an unworkable power grab, cautioning against expanding AFCA's remit too broadly. This debate is complicated by reports that AFCA itself can be used as a ‘pawn’ in some scams, adding another layer of complexity to the discussion around its powers and processes.
Analysis & Action Items
The pattern of regulatory intervention is clear and consistent with themes from previous months: a focus on governance, accountability, and consumer outcomes. This week's actions, however, represent an escalation in both tone and scope, moving from specific product issues to the fundamental structures of market operation (ASX inquiry) and trustee duties (super expenditure).
- For Licensees (0-3 months): In light of ASIC’s actions, conduct an urgent review of all marketing materials and social media activity by representatives to ensure there is no risk of providing unlicensed financial advice. The "finfluencer" crackdown demonstrates a zero-tolerance approach.
- For Financial Advisers (0-3 months): Begin updating your advice documentation and client conversation processes to comply with the new risk advice informed consent rules under the DBFO reforms. This will be a key compliance focus area once implemented.
- For Product Providers (3-12 months): Superannuation trustees must immediately review governance frameworks and expenditure policies to ensure they can withstand ASIC's intensified scrutiny. For life insurers, the proposed changes to the annuity capital framework present a strategic opportunity to develop a new suite of retirement income products.
Looking Ahead
- ASIC Inquiry into ASX: Submissions and hearings for the inquiry will be a key focus over the coming months, with potential implications for market operators and participants.
- APRA Annuity Consultation: The consultation period for the proposed changes to the life insurance capital framework for annuities is now open, with final standards expected in early 2026.
- Division 296 Legislation: The draft legislation for the tax on high-balance super accounts is expected to be introduced to Parliament in the coming months, intensifying the political and industry debate.
- DBFO Implementation: Further details and implementation timelines for the remaining tranches of the Delivering Better Financial Outcomes reforms are anticipated from Treasury.
