Welcome to Issue 29 of the FSC Policy Update – a fortnightly member briefing on the main legislative and regulatory changes across the financial services industry.
Firstly, the FSC has announced its support for the Government's temporary crisis measures regarding superannuation, announced by the Prime Minister and Treasurer yesterday (Sunday) here. Please see our media release here. Please see Treasury fact sheets of details on eligibility criteria for temporary early access to superannuation here, and temporary reduction of pension drawdown and reduction of social security deeming rates here.
We have also written to the Treasurer, Josh Frydenberg and the Assistant Minister for Superannuation and Financial Services, Senator Jane Hume, seeking urgent relief and waiver for a number of regulatory and legislative initiatives as our members prioritise the operations of their businesses and focus on assisting their customers and clients during this time of national crisis. This request is in direct response to a note issued last week by the Council of Financial Regulators here where the Council stated that regulators were standing ready to deal with problems firms may encounter in complying with the law due to the impact of COVID-19.
The FSC team has also been dealing with a considerable number of other urgent issues with various regulators and agencies on behalf of members right across the board.
Also please note we have had to cancel the Life Insurance Summit on 5 May and move it to a date later in the year to be decided.
Elsewhere in this issue, the FSC team analyses proposed Enhancements to Unfair Contract Term Protections, Guidance on the Code of Ethics for financial advisers and fund manager-regulator engagement.
To share any relevant feedback with the FSC about this issue, please email the team.
Sally Loane, FSC CEO
Click on the topic of interest below to read more
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Design and Distribution Obligations (DDO)
Draft legislation – Improving flexibility for older Australians
Enhancements to Unfair Contract Term Protections
APRA Connect - Revised implementation approach
The Financial Adviser Standards and Ethics Authority (FASEA): April Financial Adviser Exam cancelled
ASIC 329: Implementing the Royal Commission: Advice fee consents and independence disclosure
Guidance on the Code of Ethics for Financial Advisers
Future of Advice Facebook page
Fund manager regulator engagement
ASIC Document Production Guidelines
Regulator updates post Royal Commission
Group CEO was a Corporations Act “Officer”
New Foreign Financial Service Provider (FFSP) Regime
Australian Financial Complaints Authority (AFCA) defers Fairness Consultation Paper
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PARLIAMENT, LEGISLATION AND REGULATION
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Parliament is sitting this week, but the Government has advised that the legislative program will be kept to a minimum and the Parliament only will consider legislation that enacts the Coronavirus (COVID-19) stimulus package and any other ‘immediate business’. In addition, the number of Parliamentarians and staff in Canberra will be kept to a minimum.
Legislation currently before Parliament includes:
- Treasury Laws Amendment (2020 Measures No 1) Bill, currently before the House of Representatives. This legislation will provide permanent CGT relief for merging super funds and expand the definition of Significant Global Entity (SGE) to include investment entities The FSC has strongly supported the CGT change but expressed concerns about the SGE change as advised in previous FSC Policy Updates.
- Treasury Laws Amendment (2019 Measures No 3) Bill, currently before the Senate. This Bill contains changes to the tax treatment of the rollover of death benefits. The FSC has discussed with Treasury and the ATO our concerns this legislation does not meet the policy intent as advised in a previous FSC Update.
Based on the changed Parliamentary sitting program, the consideration of this legislation is likely to be deferred until at least May.
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Design and Distribution Obligations (DDO)
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The FSC circulated a third draft of a submission on the draft ASIC regulatory guide on the DDO obligations. Comments are being received from members and is being collated. If a further round of comments is not required, the submission will be finalised and submitted to ASIC soon.
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SUPERANNUATION
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Draft legislation – Improving flexibility for older Australians
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FSC members met to discuss draft legislation released by the Government to implement a package of measures from the 2019–20 Budget called “Improving flexibility for older Australians”. The measures include:
- Increasing the age at which the work test starts to apply for voluntary concessional and non-concessional superannuation contributions from 65 to 67;
- Increasing the cut-off age for spouse contributions from 69 to 74; and
- Allowing individuals aged 65 and 66 to make up to three years of non-concessional superannuation contributions under the bring-forward rule.
On the basis of these discussions, a draft FSC submission will be prepared for member comment. The consultation closes on 3 April.
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On 19 March, APRA published an updated FAQ in relation to the MySuper Heatmap.
APRA announced that it intends to publish an updated MySuper Heatmap in June 2020, based on information submitted by 29 May 2020.
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LIFE INSURANCE
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The FSC has issued a statement on behalf of its life insurance members who are subscribers to the Life Insurance Code of Practice. This statement is in response to recent developments in the COVID-19 outbreak. The statement can be found here.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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Enhancements to Unfair Contract Term Protections
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The FSC is currently preparing a submission in response to Treasury’s consultations for a review of these new protections for small business contracts (UCT Review). Treasury is also seeking views on whether any enhanced UCT protections for small business contracts should also be extended to consumer and insurance contracts. The deadline for submissions has been extended to 30 March.
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Please contact Aidan Nguyen or This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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APRA Connect - Revised implementation approach
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Noting the developing outbreak of COVID-19, APRA has revised its implementation timelines for APRA Connect, which will be the new data collection solution for reporting entities to lodge entity information and financial data with APRA. APRA Connect is scheduled to go live at the end of September 2020, with a progressive cutover of financial data reporting to the new solution. Importantly, all financial data reporting for insurance and superannuation will continue to be reported through D2A. APRA will progressively start new collections for these industries on APRA Connect in line with industry consultations. More information is now available on the new APRA Connect web pages.
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Please contact Aidan Nguyen or This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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Work on Code 2.0 continues to progress with a number of working groups having met to discuss the industry response to the feedback received on the initial consultation. Several meetings are occurring over the next week including with ASIC and a number of consumer groups to better understand how the approach taken on enforceability and discuss the approach going forward on seeking ASIC approval under the new enforceable code model.
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Please contact Jamie Kennedy or This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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While the Life Insurance Summit has been postponed until the end of the year, the FSC will be continue with the launch of the Life Insurance Awareness Week. The national week held annually in May (4 - 8 May) is aimed at boosting awareness and encouraging a conversation around the benefits of life insurance.
We invite FSC members to follow all updates on the Week via the Facebook page.
More information about the Week's activities will be available shortly.
In the meantime, if you would like to find out more - please send an email This email address is being protected from spambots. You need JavaScript enabled to view it..
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ADVICE
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The Financial Adviser Standards and Ethics Authority (FASEA): April Financial Adviser Exam cancelled
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FASEA has announced the Financial Adviser Exam scheduled for April will be cancelled due to the impact of COVID-19. However, an online substitute for financial advisers will be available. Fees for exams will either be used to book another (online) session or will be refunded. For more information read FASEA’s announcement here.
Continuing professional development (CPD) delivered face to face will also be impacted. FASEA is asking licensees to take a supportive approach to compliance. This has been set out in their announcement here.
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ASIC 329: Implementing the Royal Commission: Advice fee consents and independence disclosure
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The FSC is developing a submission on ASIC’s proposals Consultation Paper 329: Implementing the Royal Commission recommendations: Advice Fees and Independence Disclosure. This will be developed by the Superannuation and Advice Working Group and the Advice Licensing and Compliance Working Group.
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Guidance on the Code of Ethics for Financial Advisers
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The Adviser Competency Working Group has been working on definitions and areas where the Guidance on the Code of Ethics for financial advisers can be clarified. Industry want clear and explicit guidance that can be easily adapted and ensures consistency across compliance systems to meet the best interests of consumers. The FSC will engage FASEA on these points on 26 March.
Members are invited to send through concerns they have relating to the Guidance ahead of this.
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Future of Advice Facebook page
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The FSC is building an online community to link up advice businesses, advisers and consumers. We’ve launched a Facebook page for our members and the public to generate discussion, ideas and debate around the drivers of value and need for financial advice now and in the long-term and the best ways to ensure financial advice is accessible and affordable in the long-term.
You can be part of this community by:
- ‘Liking’ and ‘Share’ the page across your networks.
- Sending us your content ideas to generate discussion – case studies, insights, historic content about the difference advice has made to Australia’s society and economy over the years.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information
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TAX
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- There are several items of tax legislation currently before Parliament (see Parliament section above). However, the changed Parliamentary sitting program will significantly affect the passage of the legislation. The legislation includes changes to:
- Provide permanent CGT relief for merging super funds
- Expand the definition of Significant Global Entity (SGE) to include investment entities
- Change the tax treatment of the rollover of death benefits.
- The ATO has announced a range of relief measures relating to the impact of Covid-19, including deferral of lodgements, reduction in late penalties, and relief from the Central management and control (CM&C) and Permanent establishment rules for businesses impacted by travel restrictions.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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INVESTMENTS
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The Australian Institute of Superannuation Trustees (AIST) has provided the FSC with a final draft of its updated Operational Due Diligence (ODD) Guidance Note. AIST has asked that the FSC provide feedback on its proposed changes. The FSC has met with members to suggest changes to the Guidance Note and will be working with AIST, with a view to ensuring fund managers' views are incorporated into the new version.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. So for more information.
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Fund manager regulator engagement
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Given the fluidity of the current investment environment, the FSC has been having regular engagement with ASIC and other key stakeholders. We currently have a weekly call with ASIC. Fund manager members that would like to participate in these calls are welcome to do so.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. if you would like to participate.
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LEGAL
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ASIC Document Production Guidelines
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ASIC has released Information Sheet 242 Document production guidelines (INFO 242) and accompanying Document production guidelines (Guidelines). The purpose of the documents is to provide guidance to persons producing documents and any other record of information to ASIC in connection with investigations or surveillance activities.
See here, here and here for relevant documents.
INFO 242 and the Guidelines provide ASIC’s guidance and views on:
- ASIC powers to compel the production of documents;
- Preferred methods for producing books to ASIC in electronic and hard copy form;
- Benefits of producing books in accordance with the Guidelines;
- Consequences of failing to follow the Guidelines; and
- How ASIC requests document production when using a litigation support system.
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Regulator updates post Royal Commission
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Each of ASIC and APRA has issued updates on their respective implementation of the Royal Commission recommendations. Each Regulator also outlines its focus in terms of ongoing regulation, following the Royal Commission.
ASIC update
The ASIC update may be found here.
The update is for the six monthly period from September 2019 to February 2020. This follows the last ASIC update in September 2019. In broad summary, since that update ASIC has taken the following actions:
- Operationalised and expanded its Office of Enforcement;
- Continued the current enhanced supervision program across large listed entities in the financial services and other sectors, focusing on non-financial risk management and oversight;
- Completed implementation of four of the 10 recommendations made by the Royal Commission that were directed at ASIC, and provided significant input into the legislative reform program arising from the Royal Commission; and
- Continued to implement and use ASIC's new regulatory powers to identify and address misconduct and APRA's Update.
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APRA update
The APRA update may be found here.
In its update, released on the anniversary of the issue of the final Royal Commission report, APRA noted the following:
- It had addressed three recommendations directed to it in full;
- It was making progress on the remaining seven Royal Commission recommendations; and
- It has been undertaking detailed reviews of the 12 Royal Commission referrals involving 9 APRA-regulated entities.
The update also explores several other topics including draft CP 511 relating to remuneration practices, use of the new APRA directions power and cooperation and alignment with ASIC.
In addition, APRA refers to its November 2019 information paper. This paper sets out the APRA agenda for transforming governance, culture, remuneration and accountability (GCRA) across the institutions APRA prudentially regulates. The agenda, amongst other things, will require industry to consider GCRA and to ensure internal governance and frameworks promotes a risk culture which supports effective risk management practices, with a view to delivering positive prudential outcomes for both industry and the consumer.
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Group CEO was a Corporations Act “Officer”
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In a recent decision, the High Court found that a Group CEO was an “officer” of a subsidiary entity for the purposes of the Corporations Act: Australian Securities and Investments Commission v King.
The Court allowed an appeal from the Queensland Court of Appeal. The issue was whether a former CEO and executive director of MFS Ltd was an “officer” as defined in section 9 of the Corporations Act 2001 (Act), of a subsidiary, MFS Investment Management Pty Ltd. The High Court decided that the former CEO was an “officer” given that section 9 of the Act is not limited to those who hold or occupy a named office in a corporation or a recognised position with rights and duties attached to it. The trial judge had found the former CEO acted as the “overall boss of the MFS Group” and assumed “overall responsibility for MFSIM”. In the view of the High Court, these facts established that the Group CEO had the capacity to significantly affect the subsidiary’s financial standing. Otherwise a person who determined a company’s financial affairs could avoid responsibility for conduct by the simple expedient of deliberately eschewing any formal designation of their responsibilities (joint judgment Kiefel CJ, Gageler and Keane JJ).
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New Foreign Financial Service Provider (FFSP) Regime
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The Australian Securities & Investments Commission (ASIC) has released the final form of the following key documents in relation to the new foreign financial service provider (FFSP) regime:
- Regulatory Guide 176 Foreign financial services providers (RG 176);
- Related Legislative Instruments:
- the new funds management exemption;
- the new foreign Australian financial services licence framework for FFSPs regulated in a sufficiently equivalent regime overseas;
- “Corporate Amendment” on the applicable transition periods.
- Report 656 on responses to the ASIC FFSP Consultation Papers (CP 301 and CP 315) including key issues raised.
The FSC has been active over the last 2 years, including doing two submissions followed by a round table discussion with ASIC based on the ongoing work of the FFPS Working Group. As a result of the positive engagement between the FSC and ASIC, as well as other supportive lobbying, the above released documents incorporate the following important concessions to industry:
- Key transition periods to the new regime have been significantly increased, for example, in the case of Limited Connection Relief, from 6 months to 2 years; and
- In relation to the new Funds Management Relief, the removal of the proposed aggregated revenue cap which would have been cumbersome and very restrictive on the scope of the relief;
A successful FSC FFSP New Regime Update event was held on 12 March 2020, just after the above ASIC release, to provide insights on the new regime from representatives of ASIC and industry.
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Following the FSC's event on this Regime recently, we spoke to guest speakers from Norton Rose Fulbright for their insights on the topic. See more here.
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Australian Financial Complaints Authority (AFCA) defers Fairness Consultation Paper
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AFCA has made the following announcement:
AFCA has considered the timing for release of its consultation paper on its Fairness jurisdiction and has decided to postpone publication at this time. While the Fairness Project is very important, given the disruption being caused by COVID-19, AFCA will focus on supporting its staff, consumers and financial firms in resolving complaints during this time. We will notify stakeholders prior to publication of the consultation paper in due course.
The FSC will advise you of any further developments.
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