Australia’s new dispute resolution body expects ASIC to approve its Rules by mid-September

Maria Nikolova

All financial services firms are obliged to become members of AFCA by September 21, 2018.

The Australian Financial Complaints Authority (AFCA), a new dispute resolution body that is set to start its work in November 2018, has just published its latest edition of Member News. Australian financial services provider should pay attention to AFCA’s updates as membership in this new dispute resolution body is mandatory.

The summer has been a pretty active period for AFCA. It implemented a consultation process for the AFCA Rules and funding model in June and July respectively. The body received submissions from industry organisations, consumer bodies and financial firms.

The AFCA Board considered all feedback received and have approved both the Rules and funding model. A number of changes were made to the Rules in reposnse to stakeholder feedback. Additional information and details were also included in the draft Operational Guidelines, which will provide detailed guidance about how AFCA will interpret and apply the Rules.

AFCA has submitted the Rules to the Australian Securities & Investments Commission (ASIC) for their consideration. At this stage, AFCA anticipates ASIC will approve the Rules by mid-September. AFCA will publish the Rules then, and also intends to release the Operational Guidelines and funding model during the same period.

AFCA has drafted proposed Rules governing its jurisdiction and process for resolving complaints. The Rules, when finalised and approved by ASIC, will apply from the commencement of AFCA on November 1, 2018. The draft Rules reflect mandatory requirements in legislation, regulation and Ministerial requirements. The consultation focuses on changes in the AFCA Rules compared with those of predecessor schemes, including the incorporation of the Superannuation Complaints Tribunal’s current jurisdiction in the AFCA Rules.

Regarding the funding model, let’s recall that it is broadly based on the existing EDR scheme funding arrangements. This is a three-phase funding model, consisting of initial transition funding for establishing AFCA, an interim funding stage, and a long-term funding stage.

  • Phase I – Transition funding

This funding will be dedicated to meeting the costs of AFCA’s establishment so that it is adequately prepared to receive and handle complaints from commencement of its operations in November 2018. Te transition funding covers governance-related costs (including legal, financial, audit and other compliance costs) and the costs of establishing AFCA (project management, complaint reporting applications, website development, technology, training, communications and engagement, and other similar costs) so that the new body is ready to receive up to 1,000 complaints in the first week of commencement.

  • Phase II – Interim funding model

This funding model will apply for the first three years of AFCA operations (FY2018/2019 – FY2020/2021). During this period a hybrid funding model is proposed to be applied – based on aspects of the existing scheme funding arrangements for Firms that are FOS and CIO scheme members, and the APRA levy model for superannuation trustees who become AFCA members.

The interim funding arrangements will apply while AFCA establishes an evidence base of complaint volumes and complexity in an expanded jurisdiction, and settles complaint handling approaches and required skills/resources to manage the full range of complaints.

  • Phase III – A long-term funding model

This model is set to be adopted following a full funding review based on complaint forecasts, operational efficiency savings across the consolidated scheme, and resource requirements for the long-term future of AFCA. The long-term funding model is proposed to be implemented from July 2021.

The three components of the proposed funding model are:

  • Membership levy based on the size and type of business;
  • User charge based on the number of complaints (for firms with more than one complaint closed past the initial Registration and Referral stage);
  • Complaint fees based on complaint complexity and their solution stage reached.

Let’s also note that AFCA has recently released an updated guidance for financial firms on how to let their customers know about AFCA. From September 21, 2018, AFCA members must ensure that IDR final response letters and ‘delay letters’ include references to both the relevant predecessor external dispute resolution (EDR) scheme (which will be able to receive complaints only up until 31 October 2018) and AFCA (which will be able to receive complaints on and after 1 November 2018).

Between November 1, 2018 and February 1, 2019, such letters may continue to include references to both the predecessor EDR scheme and AFCA, provided it is clear that only AFCA can receive complaints after November 1, 2018.

On or after February 1, 2019, such letters must include references to AFCA but not the predecessor EDR schemes.

Read this next

Institutional FX

Liquidnet launches SuperBlock Matching for equities trading

“The creation of a protected space to trade the most challenging blocks is a direct response to a request from our Membership and is an extension of our existing block trading offering, to facilitate more complex and nuanced trades.”

Retail FX

Midas raises $45 million to expand brokerage beyond Turkey

Midas has raised $45 million in equity funding to expand and roll out three new products: cryptocurrency trading, mutual funds, and savings accounts.

Institutional FX

Appital launches liquidity creation functionality for buyside

“In today’s fragmented market, the likelihood of having natural market contras at size, in multiple days ADV, which also match price ambitions, is incredibly unlikely. What’s more, matching technology alone is no longer enough.”

Crypto Insider

Shiba Inu Secures $12 Million Investment to Advance its Blockchain Technology and Expand Global Ecosystem

Shiba Inu, an expansive digital assets ecosystem constructed on the Ethereum blockchain, featuring the globally recognized cryptocurrency $SHIB, today proudly announced securing a $12 million investment.

Retail FX

99.81% of NAGA shareholders approve merger with CAPEX.com

“Securing this vote will allow us, after the regulatory approvals for the merger, to execute the new business plan. We are expanding the global reach of NAGA and upgrading the SuperApp to offer a true all-in-one user experience, unique in the world of Fintech.”

Market News

Chinese Insurance Giant Leads Market in Face of US Tech Slump

Chinese insurer China Pacific Insurance has emerged as a standout performer amidst the recent flurry of activity in the Asia Pacific markets, capturing the attention of investors and traders alike.

Retail FX

Public strikes deal to acquire Stocktwits

“After launching bonds, a high-yield cash account, and options trading, Public’s platform has earned the right to be the primary brokerage platform for many investors, and we look forward to offering the full breadth of our platform to Stocktwits customers.”

blockdag

BlockDAG’s Impressive 30,000x ROI Potential and Moon-Based Keynote Captivate Solana And Bitcoin Cash Crypto Investors

Discover BlockDAG’s impressive moon keynote launch and its promise of a 30,000x ROI that is drawing investors from Solana and Bitcoin Cash.

Market News

This is it, the USD Strength has Come to an End

In the aftermath of Israel’s retaliatory strikes in Iran, the currency markets have entered a phase of heightened volatility, reflecting the intricate interplay between geopolitical tensions and economic fundamentals.

<