1. The Fintech Panorama
1.1 Please describe the kinds of fintech companies which are lively in your jurisdiction and the state of the event of the market, together with in response to the COVID-19 pandemic. Are there any notable fintech innovation traits of the previous 12 months inside specific sub-sectors (e.g. funds, asset administration, peer-to-peer lending or funding, insurance coverage and blockchain purposes)?
The COVID-19 pandemic had the biggest influence on the Australian fintech market within the final 12 months. The COVID-19 pandemic impacted the anticipated tempo of regulatory change, and considerably slowed the maturation of fintech choices. Nonetheless, whereas the trade confronted important obstacles within the face of broader financial uncertainty, many fintech companies noticed 2020 as a chance to develop and refine product and repair choices to raised meet shifting shopper preferences and mirror improvements and alternatives created by expertise. For instance, companies that had been capable of capitalise on integrating digital cost infrastructure and providers and supply on-line providers typically noticed comparatively greater uptake because of social distancing and lockdown measures.
As at the beginning of 2021, the Australian financial system and public have recovered fairly properly from the pandemic and there may be some optimism that the tempo of fintech creation, improvement and adoption will regain some pace – notably given the broadening of product choices by the Australian fintech group. Whereas earlier fintech choices had been restricted to working on the periphery of conventional monetary providers (together with lending, private finance and asset administration), the sector has now moved to disrupt the core product providing of many Australian institutional monetary service suppliers, together with funds, wallets, provide chain, wealth and funding, information and analytics and decentralised finance.
Australia’s present monetary providers coverage and regulatory context remains to be largely knowledgeable by the findings of the 2017– 2019 Royal Fee into Misconduct within the Banking, Superannuation and Monetary Providers Business (Royal Fee). The Royal Fee made a collection of suggestions for regulatory reform, specializing in issues akin to prioritising the pursuits of shoppers, overhauling conflicted remuneration buildings and altering the best way add-on merchandise are distributed. A raft of legislative modifications adopted (or are anticipated to comply with) to implement these suggestions and fintechs – notably these which are motivated to supply monetary providers in a approach that’s extra handy, personalised and simplified for shoppers – shall be properly positioned to adapt to those modifications, and seize the chance offered by the present public sentiment of dissatisfaction with conventional suppliers.
We notice that the modifications to implement the Royal Fee suggestions have typically been deferred as a consequence of COVID-19 and altering regulator priorities. Nonetheless, throughout the monetary providers sector and together with fintechs, we count on to see extra rigorous engagement with regulators such because the Australian Securities and Investments Fee (ASIC), Australian Prudential Regulation Authority (APRA) and the Australian Transaction Studies and Evaluation Centre (AUSTRAC) on licensing, conduct and disclosure and a extra proactive strategy to enforcement. For these regulators, fintech is more likely to be a major focus going ahead, notably the “Purchase Now, Pay Later” (BNPL) and cost remittance sectors.
In November 2020, ASIC launched a report on Australia’s BNPL sector, detailing the quantity and worth of transactions and made observations relating to the potential for shopper detriment. Though ASIC has acknowledged that it isn’t but acceptable to control this sector particularly, it has alluded to the potential of utilizing its latest product intervention powers and the forthcoming (October 2021) design and distribution obligations to enhance shopper outcomes.
The Reserve Financial institution of Australia (RBA) is at the moment enterprise a framework evaluate of the regulatory regime supporting varied cost strategies. This consists of reviewing any performance gaps within the retail cost system, broadly capturing the function of money, cheques and the direct entry system, the influence of latest applied sciences and entrants (together with closed loop methods and saved worth methods), the resilience of the funds system in opposition to disruptions, roles of domestic-focused schemes and frameworks, cross- border funds and the doable issuance of digital bank- notes. The report was initially slated to be produced by the tip of 2020, nonetheless this has been prolonged to 2021.
As a part of its Digital Enterprise Bundle, the Authorities (by way of the Treasury) is reviewing the regulatory structure of the Australian funds system to make sure that it stays match for function and is able to supporting continued innovation. The report is as a result of Treasurer in Could 2021.
There was sustained consideration on cryptocurrency and blockchain expertise, and a progress in curiosity within the expertise by established companies. Fintech companies have begun shifting past the proof-of-concept stage to formalising precise use circumstances for distributed ledger expertise, akin to managing provide chains, making cross-border funds, buying and selling derivatives, managing belongings and digital forex exchanges. The ASX continues to progress its plans to undertake a blockchain-based expertise for its clearing and settlement (CS) course of to exchange its present “CHESS” system. The ASX is at the moment conducting inside evaluation and testing of the expertise with particular buyer improvement workspaces and is at the moment scheduled to be carried out by April 2022 (with provision for this to be prolonged to April 2023, if required).
1.2 Are there any kinds of fintech enterprise which are at current prohibited or restricted in your jurisdiction (for instance cryptocurrency-based companies)?
On the time of writing, there haven’t been any prohibitions or restrictions on particular fintech enterprise varieties. Cryptocurrency- primarily based companies are permitted in Australia, offered such companies adjust to relevant legal guidelines (together with monetary providers and shopper legal guidelines).
2. Funding For Fintech
2.1 Broadly, what kinds of funding can be found for brand spanking new and rising companies in your jurisdiction (masking each fairness and debt)?
Companies can increase fairness utilizing conventional personal and public fundraising strategies (e.g., personal placement, preliminary public providing, and seed and enterprise capital methods), by way of grants and initiatives provided by Authorities and State/Territory companies, and thru crowdfunding.
In late 2017, a regulatory framework was launched for crowd-sourced fairness funding (CSEF) by public firms from retail buyers. Whereas lowering the regulatory obstacles to investing in small and start-up companies, the framework additionally created sure licensing and disclosure obligations for CSEF intermediaries (i.e., individuals itemizing CSEF gives for public firms). This regime was prolonged in 2018 to additionally apply to proprietary firms. Whereas there are a number of reporting necessities imposed on proprietary firms partaking in crowdfunding, there are additionally plenty of concessions made with respect to restrictions that might in any other case apply to their fund- elevating actions.
Beneath the CSEF framework, there are exemptions for individuals working markets and CS services from the licensing regimes that might in any other case be relevant to these services. These further exemptions present a method by which an individual working a platform for secondary buying and selling can search an exemption with tailor-made circumstances from extra onerous licensing necessities.
ASIC has launched Regulatory Guides 261 Crowd-sourced funding: Information for Corporations and 262 Crowd-sourced funding: Information for intermediaries to help firms searching for to boost funds by way of CSEF and intermediaries searching for to supply CSEF providers, respectively.
There have been calls to increase the prevailing crowdfunding framework to debt funding, and the Authorities has beforehand indicated that it intends to seek the advice of on this. Debt financing is much less frequent than fairness financing within the Australian fintech sector; nonetheless, companies can strategy monetary establishments, suppliers and finance firms in relation to debt finance.
Preliminary Coin Choices (ICOs) and Safety Token Choices (STOs)
ICOs as a way of funding for blockchain or cryptocurrency-related tasks, the place token issuers supply tokens in return for funds, had been typically much less fashionable in 2020 notably given the broader market uncertainty arising because of the COVID-19 pandemic.
In Could 2019, ASIC up to date its INFO 225 Preliminary coin choices steerage on the potential software of the Companies Act 2001 (Cth) (Companies Act) to ICOs. Entities ought to notice that the Companies Act might apply no matter whether or not the ICO was created and provided from Australia or abroad.
Typically, ASIC has indicated that the authorized standing of an ICO will depend on the ICO’s construction, operation, and the rights hooked up to the tokens provided within the ICO. Tokens provided in the course of the ICO might set off licensing, registration and disclosure necessities if the tokens signify monetary merchandise (e.g., pursuits in managed funding schemes, securities, derivatives or non-cash cost services). An organization collaborating in a cryptocurrency change as a market maker might also be required to carry an Australian monetary providers licence (AFSL), and an operator of a cryptocurrency change might require an Australian market licence (AML), in every case the place the related tokens represent monetary merchandise.
Given the probability that many cryptocurrency-related funding rounds shall be thought-about an providing of a monetary product, there’s a rising development for offerors to pre-emptively step into the regulatory framework by way of an STO. That is the place firms will knowingly supply monetary merchandise (normally represented in a digital type) and due to this fact adjust to all relevant licensing, registration and disclosure necessities relevant to a suggestion of regulated merchandise.
No matter whether or not a token constitutes a monetary product, ICOs and STOs shall be topic to the Australian Shopper Regulation, which features a basic prohibition on deceptive or misleading conduct in relation to the supply of providers or merchandise. In Could 2018, ASIC acquired a delegation of energy from the Australian Competitors and Shopper Fee (ACCC), enabling it to take motion the place there may be potential deceptive and misleading conduct related to such choices.
Asia Area Funds Passport and Company Collective Funding Automobiles
The Asia Area Funds Passport (Passport) was launched in 2018 and is a region-wide initiative designed to facilitate the supply of pursuits in sure collective funding schemes (CIS), established in Passport member economies, to buyers in different Passport member economies. It goals to supply Australian fund managers and operators with better entry to economies within the Asia-Pacific area by lowering regulatory hurdles.
On the time of writing, the Treasury has accomplished three tranches of session in relation to the Company Collective Funding Car (CCIV) scheme. The CCIV scheme creates a brand new sort of funding car, which can enable Australian fund managers to pursue abroad funding alternatives by way of an organization construction. It’s meant to enhance the Passport by making Australian funds extra accessible to overseas buyers. The laws implementing the CCIV scheme is but to be enacted.
The Australian funds market is dominated by unit trusts, a construction that’s unfamiliar to many offshore economies the place company and restricted partnership funding autos are the norm all through the Asia-Pacific area. The CCIV will present an internationally recognised funding car which can be capable of be extra readily marketed to overseas buyers (together with by way of the Passport).
There are issues that the reforms will add further complexity, given the far-reaching potential modifications to company, partner- ship and tax legal guidelines. Nonetheless, the enactment of the Passport and the CCIV might result in new financing alternatives for fintech companies.
2.2 Are there any particular incentive schemes for funding in tech/fintech companies, or in small/ medium-sized companies extra typically, in your jurisdiction, e.g. tax incentive schemes for enterprise funding or enterprise capital funding?
Incentives for buyers
(a) Early stage innovation firm incentives
Incentives can be found for eligible investments made in start-ups often known as Early Stage Innovation Corporations (ESICs), that are typically newly included entities with low revenue and bills.
Investments of lower than 30% of the fairness in an ESIC would typically qualify for a 20% non-refundable tax offset (capped at AUD 200,000 per investor, together with any offsets carried ahead from the prior 12 months’s funding) and a 10-year tax exemption on any capital good points arising on disposal of the funding.
(b) Eligible enterprise capital restricted partnerships
Fintech funding autos could also be structured as enterprise capital restricted partnerships (VCLPs) or early stage enterprise capital restricted partnerships (ESVCLPs), and obtain favour- in a position tax therapy for eligible enterprise capital investments.
For VCLPs, advantages embody tax exemptions for overseas buyers (restricted companions) on their share of any income or capital good points made on disposal of the funding by the VCLP, and concessional therapy of the fund supervisor’s carried curiosity within the VCLP. For ESVCLPs, the revenue tax exemption for VCLPs is prolonged to each resident and non-resident buyers, plus buyers acquire a ten% non-refundable tax offset for brand spanking new capital invested within the ESVCLP.
Incentives for fintechs
The Analysis & Growth (R&D) Tax Incentive programme is out there for entities incurring eligible expenditure on R&D actions, which incorporates sure software program R&D actions generally carried out by fintechs. Relying on the scale of the enterprise, claimants beneath the R&D Tax Incentive could also be eligible for one of many following incentives:
(a) Small companies (lower than AUD 20 million aggregated turnover): a 43.5% refundable tax offset; or
(b) Different companies (aggregated turnover of AUD 20 million or extra): a 38.5% non-refundable tax offset for eligible expenditure beneath AUD 100 million and 30% for eligible expenditure over AUD 100 million.
Important modifications to the R&D Tax Incentive programme have been enacted, which can apply from the primary revenue 12 months commencing on or after 1 July 2021. Beneath the modifications, firms with an annual aggregated turnover of lower than AUD 20 million will be capable of entry a refundable offset of 18.5% above the claimant’s company tax price, which from 1 July 2021 shall be 25% offering a 43.5% refundable tax offset. The modifications additionally embody the introduction of an “incremental depth threshold”, which will increase or decreases the non-refundable tax offset avail- capable of firms with an annual aggregated turnover of AUD 20 million or extra primarily based on the proportion of their eligible R&D expenditure as a share of complete enterprise expenditure.
2.3 Briefly, what circumstances must be glad for a enterprise to IPO in your jurisdiction?
The ASX units out 20 circumstances to be glad in its Itemizing Guidelines. Briefly, these embody the entity having no less than 300 non-affiliated safety holders every holding the worth of no less than AUD 2,000, and the entity satisfying both the revenue check or the belongings check (which requires specific monetary thresholds to be met).
2.4 Have there been any notable exits (sale of enterprise or IPO) by the founders of fintech companies in your jurisdiction?
Regardless of the COVID-19 pandemic, there have been plenty of IPOs together with that of Douugh, a “sensible financial institution” harnessing synthetic intelligence to supply banking options, Credit score Clear, a cell resolution for funds and the streamlining of how receivables are collected of receivables, and Payright, which gives BNPL options.
3. Fintech Regulation
3.1 Please briefly describe the regulatory framework(s) for fintech companies working in your jurisdiction, and the kind of fintech actions which are regulated.
Broadly, the regulatory framework that applies to fintech companies consists of monetary providers and shopper credit score licensing, registration and disclosure obligations, shopper regulation necessities, privateness and anti-money laundering and counter-terrorism financing (AML/CTF) necessities.
Licensing obligations apply to entities that keep on a monetary providers enterprise in Australia or interact in shopper credit score actions. The definitions of monetary service and monetary product are broad, and can typically seize any funding or wealth administration enterprise, cost service (e.g., non-cash cost facility), advisory enterprise (together with robo-advice), buying and selling platform, and crowdfunding platform, triggering the requirement to carry an AFSL or be entitled to depend on an exemption. Equally, partaking in peer-to-peer lending actions will typically represent shopper credit score actions and set off the requirement to carry an Australian credit score licence (ACL) or be entitled to depend on an exemption.
Fintech companies might also want to carry an AML the place they function a facility by way of which gives to purchase and promote monetary merchandise are frequently made and accepted (e.g., an change). If an entity operates a CS mechanism which allows events trans- performing in monetary merchandise to satisfy obligations to one another, the entity should maintain a CS facility licence or in any other case be exempt.
The Australian Shopper Regulation applies to all Australian companies that interact or contract with shoppers. Obligations embody a basic prohibition on deceptive and misleading conduct, false or deceptive representations, unconscionable conduct and unfair contract phrases in relation to the supply of providers or merchandise.
The Anti-money Laundering and Counter-terrorism Financing Act 2006 (Cth) (AML/CTF Act) applies to entities that present “designated providers” with an Australian connection. Typically, the AML/CTF Act applies to any entity that engages in monetary providers or credit score (shopper or enterprise) actions in Australia. Obligations embody enrolment with AUSTRAC, reporting and buyer due diligence.
The Banking Act 1959 (Cth) regulates these engaged within the enterprise of banking to be authorised by APRA (i.e., be an “authorised deposit-taking establishment” or ADI) earlier than partaking in such enterprise. It additionally accommodates the Banking Government Accountability Regime (BEAR), which can be administered by APRA and establishes, amongst different issues, accountability obligations for ADIs and their senior executives and administrators, and deferred remuneration, key personnel and notification obligations for ADIs.
The Cost Techniques (Regulation) Act 1998 (Cth) regulates bought cost facility suppliers in relation to saved worth services. Typically, such holders of saved worth have to be an ADI or be exempt from the requirement. The RBA is at the moment reviewing the regulatory framework for retail funds and closed submissions on its Points Paper on the matter in January 2020.
The Monetary Sector Assortment of Knowledge Act 2001 (Cth) (FSCODA) is designed to help APRA within the assortment of knowledge related to monetary sector entities. FSCODA typically applies to any company partaking within the provision of finance in the middle of carrying on enterprise in Australia, and APRA collects information from registered monetary firms beneath FSCODA. Typically, registered monetary firms with belongings better than AUD 50 million have to frequently report back to APRA statements of monetary place.
The Monetary Sector (Shareholdings) Act 1998 (Cth) creates an possession restrict of 20% in a monetary sector firm with out approval from the Treasurer.
3.2 Is there any regulation in your jurisdiction particularly directed at cryptocurrencies or cryptoassets?
On the time of writing, there are not any legal guidelines in Australia which have been carried out to particularly regulate cryptocurrencies or cryptoassets. Typically, the predominant give attention to the regulation of cryptocurrencies has revolved round its software to the established monetary providers regulatory framework.
At present, the one formal monitoring of cryptocurrency exercise in Australia is in relation to AML/CTF, mentioned in additional element in query 4.5.
3.3 Are monetary regulators and policy-makers in your jurisdiction receptive to fintech innovation and technology-driven new entrants to regulated monetary providers markets, and if that’s the case how is that this manifested? Are there any regulatory ‘sandbox’ choices for fintechs in your jurisdiction?
Regulators have additionally dedicated to serving to fintech companies extra broadly by streamlining entry and providing casual steerage to boost regulatory understanding. Each ASIC and AUSTRAC have established Innovation Hubs to help start-ups in navigating the Australian regulatory regime. AUSTRAC’s Fintel Alliance has an Innovation Hub focused at combatting money-laundering and terrorism-financing and enhancing the fintech sector’s relationship with Authorities and regulators.
ASIC has made sure class orders establishing a fintech licensing exemption and launched Regulatory Information 257, which particulars ASIC’s framework for fintech companies to check sure monetary providers, monetary merchandise and credit score actions with out holding an AFSL or ACL by counting on the category orders (known as the regulatory sandbox). This was up to date in September 2020 with the introduction of the improved regulatory sandbox to permit testing of a broader vary of monetary providers and credit score actions for an extended length. There are strict eligibility necessities for each the kind of companies who can enter the regulatory sandbox and the services and products that qualify for the licensing exemption. As soon as a fintech enterprise accesses the regulatory sandbox, there are restrictions on what number of individuals will be supplied with a monetary services or products and caps on the worth of the monetary services or products which will be offered.
Regulators in Australia have been receptive to the doorway of fintechs and technology-focused companies. The monetary providers regulatory regime adopts a expertise impartial strategy, whereby providers shall be regulated equally, regardless of the tactic of supply. Nonetheless, additional concessions have been made by regulators in an effort to help technologically-focused start-ups coming into the market.
ASIC has additionally entered into plenty of cooperation agreements with abroad regulators beneath which there’s a cross-sharing of knowledge on fintech market traits, encouraging referrals of fintech firms and sharing insights from proofs of ideas and innovation competitions. It’s also the intention of plenty of these agreements to additional perceive the strategy to regulation of fintech companies in different jurisdictions, in an try to raised align the therapy of those companies throughout jurisdictions.
3.4 What, if any, regulatory hurdles should fintech companies (or monetary providers companies providing fintech services and products) that are established exterior your jurisdiction overcome in an effort to entry new prospects in your jurisdiction?
Regulatory hurdles embody registering with ASIC in an effort to keep on a enterprise in Australia (typically glad by incorporating a neighborhood subsidiary or registering a department workplace), satisfying relevant licensing, registration and disclosure necessities if offering monetary providers or partaking in shopper credit score actions in Australia (or qualifying to depend on an exemption to such necessities), privateness, and complying with the AML/CTF regime. Broadly, these regulatory hurdles are decided by the extent to which the supplier needs to ascertain an Australian presence, the kinds of monetary services and products offered, and the kind of Australian buyers focused.
In previous, it has been frequent for overseas monetary providers suppliers (FFSPs) to supply monetary providers to wholesale shoppers in Australia by counting on ASIC’s “passport” or “restricted connection” aid from the requirement to carry an AFSL. In March 2020, ASIC repealed each passport and restricted connection aid and introduced the implementation of a brand new overseas AFSL regime and funds administration aid. FFSPs at the moment counting on passport aid or restricted connection aid might achieve this till 31 March 2022 whereas different FFSPs might apply for a FAFSL from 1 April 2020, topic to sure eligibility standards. Funds administration aid will start on 1 April 2022.
4. Different Regulatory Regimes / Non-Monetary Regulation
4.1 Does your jurisdiction regulate the gathering/use/ transmission of private information, and if sure, what’s the authorized foundation for such regulation and the way does this apply to fintech companies working in your jurisdiction?
In Australia, the Privateness Act 1988 (Cth) (Privateness Act) regulates the dealing with of private info by Authorities companies and personal sector organisations with an mixture group income of no less than AUD 3 million. In some situations, the Privateness Act will apply to companies (e.g., credit score suppliers and credit score reporting our bodies) no matter turnover.
The Privateness Act consists of 13 Australian Privateness Rules (APPs), which impose obligations on the gathering, use, disclosure, retention and destruction of private info.
The Notifiable Knowledge Breaches (NDB) scheme was launched in 2018. The NDB scheme mandates that entities regulated beneath the Privateness Act are required to inform any affected people and the Workplace of the Australian Info Commissioner (OAIC) within the occasion of an information breach (i.e., unauthorised entry to or disclosure of knowledge) which is more likely to lead to critical hurt to these people. The NDB scheme applies to companies and organisations that the Privateness Act requires to take steps to safe sure classes of private info.
In response to the Productiveness Commissions’ report on Knowledge Availability and Use, the Authorities shall be implementing the nationwide shopper information proper (CDR) framework which can give prospects a proper to share their information with accredited service suppliers (together with banks, comparability providers, fintechs or third events), encouraging the movement of knowledge within the financial system and competitors throughout the market. The CDR frame- work will first be utilized to the banking sector beneath the “Open Banking” regime, whereby shoppers will be capable of train better entry and management over their banking information. These sharing preparations are meant to facilitate simpler swap- ping of service suppliers, enhancement of buyer expertise primarily based on private and aggregated information, and extra personalised choices. Beneath Open Banking, as at 1 July 2020, Australian financial institution prospects can allow accredited third events to entry their financial savings and bank card information and, from 1 November 2020, may also give permission to accredited third events to entry mortgage, private mortgage and joint checking account information.
The European Union (EU) Basic Knowledge Safety Regulation has extraordinarily broad extra-territorial attain and might also influence the info dealing with practices of Australian companies providing items and providers within the EU.
4.2 Do your information privateness legal guidelines apply to organisations established exterior of your jurisdiction? Do your information privateness legal guidelines limit worldwide transfers of information?
The Privateness Act has extra-territorial operation and extends to acts undertaken exterior Australia and its exterior territories the place there may be an “Australian hyperlink” (i.e., the place the organisation is an Australian citizen or organisation) or carries on a enterprise in Australia and collects private info in Australia.
Beneath the framework for cross-border disclosure of private info, APP entities should take cheap steps to make sure that abroad recipients deal with private info in accordance with the APPs, and the APP entity is accountable if the abroad recipient mishandles the knowledge. The APP entity should additionally solely disclose info for the first function for which it was collected.
4.3 Please briefly describe the sanctions that apply for failing to conform along with your information privateness legal guidelines.
The Privateness Act confers on the OAIC quite a lot of investigative and enforcement powers to make use of in circumstances the place a privateness breach has occurred, together with:
- the facility to analyze a matter following a grievance or on the OAIC’s personal initiative;
- the facility to make a dedication requiring the cost of compensation or different treatments, akin to the supply of entry or the issuance of an apology;
- enforceable undertakings;
- searching for an injunction; and
- searching for civil penalties of as much as AUD 420,000 for people and as much as AUD 2.1 million for our bodies company.
4.4 Does your jurisdiction have cyber safety legal guidelines or rules which will apply to fintech companies working in your jurisdiction?
Cyber safety regulation has been a key focus of regulators and the Authorities given the fast innovation within the fintech house and the interaction between monetary providers, monetary merchandise and new applied sciences. Cyber criminals have additionally been profiting from the COVID-19 disaster to conduct widespread COVID-19-themed e mail and SMS phishing campaigns.
In August 2020, the Authorities launched its Cyber Safety Technique 2020, which can make investments AUD 1.67 billion over 10 years in a tripartite strategy to defending, enhancing and imposing and this shall be delivered by way of motion by governments, companies and the group. The Authorities has additionally established an Business Advisory Committee to form the supply of short- and longer-term actions as set out in its technique.
ASIC supplies plenty of sources to assist companies enhance their cyber resilience, together with studies, articles and apply guides. In December 2019, ASIC launched Report 651 Cyber Resilience of companies in Australia’s monetary markets: 2018–19 (REP 651). REP 651 identifies key traits in cyber resilience practices and highlights present good practices and areas for enchancment. ASIC recognized funding, training, acquisition and retention of expert sources, and powerful management from senior administration as being core components to sustaining sturdy cyber resilience. Nonetheless, ASIC expressed concern in direction of the development of outsourcing non-core features to third-party suppliers, as this created problem when managing cyber safety dangers in a enterprise’ provide chain.
ASIC has beforehand offered steerage relating to cyber safety in Report 429 Cyber Resilience – Well being Examine and Report 555: Cyber resilience of companies in Australia’s monetary market. In these studies, ASIC examined and offered examples of fine practices recognized throughout the monetary providers trade and questions board members and senior administration of monetary organisations ought to ask when contemplating their cyber resilience. ASIC’s Regulatory Information 255 additionally set out the requirements and frameworks in opposition to which suppliers of digital recommendation ought to check their info safety preparations, and nominated frame- works set out related compliance measures which ought to be put in place the place cloud computing is relied upon.
Australia has ratified the Council of Europe Conference on Cybercrime (the Budapest Conference), which codifies what constitutes a felony offence in our on-line world and streamlines worldwide cybercrime cooperation between signatory states. Australia’s accession was mirrored within the passing of the Cybercrime Laws Modification Act 2011 (Cth).
4.5 Please describe any AML and different monetary crime necessities which will apply to fintech companies in your jurisdiction.
The AML/CTF Act applies to entities that present “designated providers” with an Australian connection. Fintech enterprise will typically have obligations beneath the AML/CTF Act as monetary providers, and lending companies sometimes contain the supply of designated providers. Obligations embody:
- enrolling with AUSTRAC;
- conducting due diligence on prospects previous to offering any designated providers;
- adopting and sustaining an AML/CTF programme; and
- reporting yearly to AUSTRAC and as required on the prevalence of a suspicious matter, a switch of forex with a worth of AUD 10,000 or extra, and all worldwide funds directions.
Digital forex change suppliers even have obligations beneath the AML/CTF Act and should register with AUSTRAC or face a penalty of as much as two years’ imprisonment or a nice of as much as AUD 105,000 (or each) for failing to register. Trade operators are required to maintain sure information regarding buyer identification and transactions for as much as seven years.
4.6 Are there another regulatory regimes which will apply to fintech companies working in your jurisdiction?
An entity that conducts any “banking enterprise”, akin to taking deposits (aside from as part-payment for recognized items or providers) or making advances of cash, have to be licensed as an ADI. APRA has carried out a Restricted ADI framework, which permits new companies coming into the banking trade like neobanks to conduct a restricted vary of banking actions for 2 years whereas they construct their capabilities and sources. After two years, they have to both transition to a full ADI licence or exit the trade. As of February 2021, there may be one Restricted ADI on APRA’s register however a number of Restricted ADIs have since transitioned to holding full ADI standing since 2018 or handed again their licences. Being an ADI permits such entities to function as an ADI with out restrictions beneath the Banking Act 1959 (Cth). We notice that because the neobank trade has matured, we’re already seeing some consolidation with one such Australian neobank being acquired by a Large 4 institutional financial institution.
Fintech companies are additionally topic to the prohibitions specified by the Australian Shopper Regulation, which is run by the ACCC. Broadly, this consists of prohibitions on deceptive and misleading conduct, false or deceptive representations, unconscionable conduct and unfair contract phrases. Whereas the Australian Shopper Regulation doesn’t apply to monetary services or products, many of those protections are enforced by ASIC both by way of mirrored provisions within the Australian Securities and Investments Fee Act 2001 (Cth) or by way of delegated powers.
5. Accessing Expertise
5.1 In broad phrases, what’s the authorized framework across the hiring and dismissal of workers in your jurisdiction? Are there any notably onerous necessities or restrictions which are regularly encountered by companies?
The hiring and dismissal of workers in Australia is ruled beneath the Honest Work Act 2009 (Cth) (Honest Work Act). In relation to hiring, minimal phrases and circumstances of employment for many workers (together with professionals) are ruled by trendy awards, which sit on prime of the Nationwide Employment Requirements. Nonetheless, trendy awards don’t apply to workers incomes over a threshold of AUD 153,600 (from 1 July 2020, threshold listed yearly), offered their earnings are guar- anteed by written settlement with their employer.
To terminate an worker’s employment, an employer has to present an worker written discover of the final day of employment. There are minimal discover intervals depending on the worker’s interval of steady service, though the worker’s award, employment contract, enterprise settlement or different registered settlement might set out longer minimal discover intervals. Discover will be paid out quite than labored; nonetheless, the quantity paid to the worker should equal the complete quantity the worker would have been paid in the event that they labored till the tip of the discover interval. For critical misconduct, employers don’t want to supply a discover of termination; nonetheless, the worker have to be paid all excellent entitlements akin to cost for time labored or annual go away.
5.2 What, if any, necessary employment advantages have to be offered to workers?
Beneath the Honest Work Act, minimal entitlements for workers are set out beneath trendy awards and embody phrases and circumstances akin to minimal charges of pay and extra time.
Australia additionally has 10 Nationwide Employment Requirements. These embody most weekly hours, requests for versatile working preparations, parental go away and associated entitlements, annual go away, lengthy service go away, sick go away, compassionate go away, public holidays, discover of termination and redundancy pay, and a good work info assertion.
The Honest Work Act additionally has some basic safety provisions governing an individual’s office rights, freedom of affiliation and office discrimination, with treatments accessible to workers if these provisions are contravened.
5.3 What, if any, hurdles should companies overcome to carry workers from exterior your jurisdiction into your jurisdiction? Is there a particular route for acquiring permission for people who want to work for fintech companies?
Migrants require working visas from the Division of House Affairs (DOHA) in an effort to work in Australia, and every sort has its personal eligibility necessities. Companies can nominate or sponsor such visas.
The Non permanent Talent Scarcity (subclass 482) visa (TSS visa) is the commonest type of employer-sponsored visa for immigration to Australia. To be eligible for the TSS visa, an applicant’s occupation should:
- be on the short-term expert occupations checklist, with a most visa interval of two years or as much as 4 years if an Worldwide Commerce Obligation applies (Hong Kong pass- port holders are eligible to remain as much as 5 years), with an choice to use for everlasting residency topic to eligibility necessities;
- be on the medium and long-term technique abilities checklist or the regional occupational checklist, with a most interval of 4 years (or 5 years for Hong Kong passport holders) and an choice to use for everlasting residency, topic to eligibility necessities; or
- have an employer that has a labour settlement with the Australian Authorities in impact, with a most interval of as much as 4 years (or 5 years for Hong Kong passport holders).
As on the time of writing, there isn’t any particular route for acquiring permission for people who want to work for fintech companies. Nonetheless, beneath DOHA’s Enterprise Innovation and Funding visa programme, DOHA has launched an entrepreneur stream visa (Enterprise Innovation and Funding (Provisional) visa (subclass 188)) for nominated candidates that, amongst different circumstances, are youthful than 55, personal one or two companies with no less than AUD 500,000 turnover within the two of 4 fiscal years previous to receiving an invite to use, have private and enterprise belongings of no less than AUD 800,000 and meet sure well being, probity, language and character necessities. The visa permits holders to function a brand new or present enterprise in Australia and keep in Australia for as much as 4 years and three months with the choice to use for a everlasting Enterprise Innovation and Funding (Everlasting) visa (subclass 888) Enterprise Innovation stream if sure necessities are met.
6.1 Please briefly describe how improvements and innovations are protected in your jurisdiction.
Patent safety is out there for sure kinds of improvements and innovations in Australia. There are two kinds of patents granted in Australia:
- Commonplace patent: A typical patent supplies long-term safety and management over an invention, lasting for as much as 20 years from the submitting date. The necessities for the standard patent embody the invention being new, involving an creative step and having the ability to be made or utilized in an trade.
- Innovation patent: An innovation patent is focused at innovations with brief market lives, lasting as much as eight years. These fast and comparatively cheap patents are aimed toward defending innovations that don’t meet the creative threshold, as an alternative requiring that an invention contain an progressive step.
Nonetheless, the Australian Authorities has begun the method of phasing out the innovation patent with the passing of legislative amendments. The final day to file a brand new innovation patent is 25 August 2021 and any present innovation patents that had been filed on or earlier than 25 August 2021 will proceed to be in drive till their expiry.
In Australia, provisional purposes may also be filed as an affordable technique of signalling intention to file a full patent software sooner or later, offering candidates with a precedence date. Nonetheless, submitting this software alone doesn’t present the applicant with patent safety, however does give the particular person submitting 12 months to resolve whether or not to proceed with a patent software.
Design safety is out there, for a interval as much as 10 years, of any design that’s each new and distinctive. Safety relies on visible look.
An Australian patent solely supplies safety in Australia. To acquire safety overseas, the applicant might want to file separate patent purposes in every nation or file a single worldwide software beneath the Patent Cooperation Treaty (PCT), which supplies the appliance impact in 152 nations together with Australia. PCT purposes primarily based on a provisional software have to be executed inside 12 months of submitting the provisional software.
6.2 Please briefly describe how possession of IP operates in your jurisdiction.
Broadly, the particular person or enterprise that has developed mental property (IP) typically owns that IP, topic to any present or competing rights. In an employment context, the employer typically owns new IP rights developed in the middle of employment, except the phrases of employment comprise an efficient task of such rights to the worker. Contractors, advisors and consultants typically personal new IP rights developed in the middle of engagement, except the phrases of engagement comprise an efficient task of such rights to the corporate by whom they’re engaged.
Beneath the Copyright Act 1968 (Cth), creators of copyright works akin to literary works (together with software program) additionally retain ethical rights within the work (for instance, the precise to be named as creator).
Ethical rights can’t be assigned however creators can consent to actions that might in any other case quantity to an infringement.
6.3 With a view to defend or implement IP rights in your jurisdiction, do you have to personal native/nationwide rights or can you implement different rights (for instance, do any treaties or multi-jurisdictional rights apply)?
Choices accessible to guard or implement IP rights depend upon the kind of IP. For example, software program (together with supply code) is robotically protected beneath the Copyright Act 1968 (Cth). An proprietor might also apply to IP Australia, the Authorities physique administering IP rights and laws, for software program to be registered beneath the Designs Act 2003 (Cth) or patented beneath the Patents Act 1967 (Cth). Software program may also be protected contractually by way of confidentiality agreements between events.
A typical, innovation or provisional patent may also be held to guard or implement IP rights in Australia (although we notice innovation patents are to be phased out later this 12 months). Australia can be a celebration to the PCT, administered by the World Mental Property Group. A PCT software is robotically registered as a normal patent software inside Australia, however the energy to efficiently grant patent rights stays with IP Australia.
6.4 How do you exploit/monetise IP in your jurisdiction and are there any specific guidelines or restrictions relating to such exploitation/monetisation?
In Australia, there are typically 5 approaches to commercialising IP. These are:
- Task: An outright sale of IP, transferring owner- ship to a different particular person with out imposing any efficiency obligations.
- Direct in-house use of IP: Homeowners of IP might commercialise the IP inside an present entity already of their management. That is typically frequent if the IP was initially created in-house or was acquired as described above.
- Licensing: Permission is granted for IP for use on agreed phrases and circumstances. There are three kinds of licence (unique licence, non-exclusive licence and sole licence) and every comes with circumstances.
- Franchising: A way of distributing items and providers, the place the franchisor owns the IP rights over the advertising system, service technique or particular product and the franchisee pays for the precise to commerce beneath a model title and agrees to comply with directions on working the franchise.
- Begin-up or spin-off: The place a separate firm (both new (start-up) or partitioning from an present firm (spin-off)) is established to carry a expertise developed by a mum or dad firm to the market. IP actions to be carried out for spin-offs embody due diligence, confidentiality, employment contracts, task agreements and licence agreements.
Broadly, a enterprise can solely exploit or monetise IP that the enterprise in reality owns or is entitled to make use of. Restrictions apply to the usage of IP that infringes present manufacturers, and treatments (sometimes injunctions and damages) can be found the place the usage of IP infringes the rights of one other enterprise.