ACL Holders: Coronavirus and ASIC requirements – what do you need to do?

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Now is the Time to Review Your Risk Management Plan

All Australian Credit Licence (“ACL”) holders must ensure they take precautions and be vigilant about the risks brought about by the increasing number of confirmed COVID-19 cases in Australia and globally.

We suggest you review the following systems and documents:

  • Business Continuity Plan:
    • review, update and test the plan regularly, incorporating new information and address emerging challenges;
    • ensure back-up arrangements operate as planned with allocated resources, considering your human and technical resources;
    • implement an Incident Response Plan for a pandemic that:
      • outlines actions to limit the loss of life and property before, during and immediately after a pandemic;
      • aims to shorten recovery time and minimise business losses following a pandemic; and
      • sets timeframes for resumption of usual business operations.
  • Risk Management Systems:
    • implement a Risk Management Plan for a pandemic that identifies and assesses risks to your business, as well as strategies to manage these risks;
    • execute a Business Impact Analysis for a pandemic by identifying activities that are critical for the survival of your business and prioritise what has to be done to maintain them; and
    • conduct stress testing of systems and financial positions, in case the financial markets experience further shocks which increase pressure on systems.

Key Areas of Consideration

As the cases of COVID-19 rise, we recommend you consider the following questions to identify potential areas of concern in relation to your organisation:

  1. Have you incorporated new information to address emerging challenges in your Business Continuity Plan?
  2. When did you last test your back-up arrangements?
  3. Have you considered your own exposure to industries affected by COVID-19 such as air and local transport, ports, manufacturing and technology supply chains?
  4. Have any services provided by your organisation or affiliates been disrupted?
  5. Have you provided guidance or imposed limitations on domestic and/or international travel and if so, what are the limitations in place?
  6. Have you observed any clients experiencing financial hardship and if so, how are you managing that?

More generally, we encourage all credit licensees to assess the impacts of COVID-19 in respect of your ability to meet the following requirements:

ObligationRequirements
You must have adequate financial, technological and human resources to engage in credit activities covered by your license or in carried over instrument lending activity, and to carry out supervisory arrangementss47(1)(l)(i) and RG205
Explicitly identify the risks you face and have measures in place to keep those risks to an acceptable minimums47(1)(l)(ii) and RG205
Do all things necessary to ensure that the credit activities authorised by the license are engaged in efficiently, honestly and fairlys47(1)(a)
Comply with the conditions on your licences47(1)(c)

What has ASIC said so far?

On 2 March 2020, ASIC sent a cautionary email to some financial services licensees encouraging them to review their preparedness for the pandemic in line with many of the items outlined above.

Pandemics can severely upset business operations by causing high absenteeism and impede on a business’s ability to deliver products and services.

If you have any questions regarding your current business continuity plan or risk management system, or any extraordinary staffing measures you intend to take, please contact Sophie Grace.

About The Author

Melody Gao

Melody assists in preparing, reviewing and negotiating legal documentation for participants in the financial services industry. Melody also assists with developing, reviewing and amending compliance documentation. She also supports the Compliance Consultants with the preparation of AFSL and ACL applications, variations and compliance reviews. Melody provides ongoing legal support and also assists in implementing ongoing compliance support, updating procedural documentation and preparing compliance reporting for Compliance Committees and Boards of Directors.

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