Welcome to Issue 31 of the FSC Policy Update – a fortnightly member briefing on the main legislative and regulatory changes across the financial services industry. Today marks the official start date of the Government's temporary early access to superannuation initiative, which the FSC supports. Across financial services, it is all hands on deck to ensure Australians are as well-supported as possible during this economic crisis. To that end, your FSC team has been working closely with regulators, Treasury and agencies to secure relief and waiver from non-critical legislation and regulation so that our members can place as many resources as needed into front-line operations to help their customers.
In this issue the FSC team details regulatory relief, including that relating to Advice concerning early release of and access to superannuation and Portfolio Holdings Disclosure.
To share any relevant feedback with the FSC about this issue, please email the team.
Sally Loane, FSC CEO
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Click on the topic of interest below to read more
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Early Release of Superannuation
Portfolio Holdings Disclosure relief to be extended
Improving flexibility for older Australians
ASIC regulatory relief relating to COVID-19
JobKeeper payment – issues for financial service businesses
Frontline Healthcare Worker Commitment
Mental Health & Life Insurance Round table
ASIC grants temporary relief for financial advice
ASIC’s FAQ for Financial Advisers and Licensees
The Financial Adviser Standards and Ethics Authority (FASEA) Guidance
Get involved with the Future of Advice project
ASIC updates guidance on internal market making and Information Sheet 230
RG 97: Platforms Review and PDS Transition Dates
Impact of COVID-19: ASIC Letter to Responsible Entities (REs)
Impact of COVID-19: APRA: temporary suspension of issuing of new licences
Impact of COVID-19: ASIC focus on COVID-19 challenges
Impact of COVID-19: APRA-regulated entities and capital management
Impact of COVID-19: Australian Financial Complaints Authority (AFCA): Time to respond to complaints
London Inter-Bank Offered Rate (LIBOR) transition: APRA and ASIC
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SUPERANNUATION
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Early Release of Superannuation
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The ATO will begin accepting applications today under the new early release conditions.
The ATO provided an update on 17 April noting that over 880,000 Australians have currently registered interest in accessing their superannuation.
In addition to the APRA and ASIC FAQ updates noted here, ASIC has also updated the COVID-19 information on its MoneySmart site, providing additional information to assist consumers making decisions about their finances during the pandemic.
ASIC has also made it easier for individuals to access financial advice in relation to the early release of super (see Advice section below).
On 16 April, the Treasury Laws Amendment (Release of Superannuation on Compassionate Grounds) Regulations 2020 were put in place to allow temporary residents affected by the adverse economic effects of coronavirus to have up to $10,000 released from their superannuation or retirement savings account on compassionate grounds.
The FSC is continuing to engage with Government and regulators in relation to the early release scheme.
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Portfolio Holdings Disclosure relief to be extended
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On 16 April, ASIC updated its FAQs to specify that it will defer the commencement date for portfolio holdings disclosure obligations, noting that the relevant regulations have not yet been made and current conditions would make it difficult for funds to comply with the current timeline even if the regulations were to be made in the near future.
The existing relief is due to expire on 31 December. ASIC has not announced the length of this new deferral.
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Both APRA and ASIC updated their FAQs in relation to COVID-19 on 16 April.
APRA’s additional FAQs relate to the early release of superannuation, including expectations around checking of bank account details and an expectation that most early release payments will be made within five days.
ASIC’s updates relate to member communications expectations for the early release scheme, and confirming an extension of existing relief for Portfolio Holdings Disclosure.
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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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Improving flexibility for older Australians
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The FSC has made a submission in relation to draft legislation and regulations in the Improving Flexibility For Older Australians package. 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.
The FSC supported the measures but recommended the Government delay the scheme given it appears unable to be legislated before the proposed commencement date.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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PARLIAMENT, LEGISLATION AND REGULATION
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ASIC regulatory relief relating to COVID-19
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On 14 April, ASIC announced significant changes to its priorities in response to COVID-19. Many ASIC reviews and initiatives have been delayed, often for substantial periods, recognising that both ASIC and regulated entities have changed focus as a result of the pandemic.
This announcement responded to the FSC’s detailed requests to ASIC for deferrals which the FSC sent to ASIC on 30 March.
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Federal Parliament sat on 8 April, considering and passing legislation responding to COVID-19, particularly the JobKeeper policy announced on 30 March. The Treasurer separately made the JobKeeper rules on 9 April.
As advised in the previous FSC update, the Parliament sitting on 8 April did not consider other legislation currently before Parliament.
The Parliament will return for a ‘trial week’ of sitting in May to consider normal Parliamentary business.
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JobKeeper payment – issues for financial service businesses
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There are several issues relating to eligibility for the JobKeeper payment for financial services businesses, including:
- The main turnover test used to determine eligibility for JobKeeper excludes input taxed supplies – this means that both the before and after turnover figures are not correctly measured for many financial service businesses; and
- The tests do not appear to work correctly for financial services businesses set up with separate service and employing entities.
A member meeting has been organised to discuss these issues on 22 April.
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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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LIFE INSURANCE
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Frontline Healthcare Worker Commitment
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The FSC has announced an industry initiative, the Frontline Healthcare Worker Commitment, to help Australian frontline healthcare workers by ensuring the vital work they are doing will not prevent them from taking out new life insurance cover through participating life insurance companies.
This initiative has received interim ACCC authorisation allowing life insurers to co-ordinate to ensure frontline healthcare workers are not excluded from coverage due to potential or actual exposure to COVID-19.
All information, including media releases and a commitment infographic, can be found here.
The FSC has announced an industry initiative designed , the Frontline Healthcare Worker Commitment, to help Australian frontline healthcare workers by ensuring the vital work they are doing will not prevent them from taking out new life insurance cover through participating life insurance companies.
This initiative has received interim ACCC authorisation allowing life insurers to co-ordinate to ensure frontline healthcare workers are not excluded from coverage due to potential or actual exposure to COVID-19.
All information, including media releases and a commitment infographic, 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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Mental Health & Life Insurance Round table
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On 7 April, the FSC hosted a virtual round table between life insurance industry and mental health industry stakeholders. The FSC is in the process of developing a series of podcasts for members to provide insights industry leaders and community voices on the unfolding impacts of the coronavirus outbreak on the mental health of Australians. Further details to be announced.
To hear mental health messages from some of the round table's industry leading participants, see here.
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The FSC and KPMG are pleased to release the results of the cause of claim based on the fourth industry led life insurance claims and claims related disputes for the period 1 January 2019 to 31 December 2019. The industry results can be accessed through Tableau Server.
If you have any questions regarding the investigation or having difficulties accessing the results, please contact the functional mailbox This email address is being protected from spambots. You need JavaScript enabled to view it..
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Please contact Aidan Nguyen for other information.
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Progress on Life Code 2.0 continues with a number of sub-working groups convened to consider in detail the feedback provided by stakeholders to the first round of consultation and the proposed industry response. The FSC continues to engage with the regulators on enforceable code provisions and on the status of the enforceable code legislation.
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Please contact Jamie Kennedy for more information.
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ADVICE
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ASIC grants temporary relief for financial advice
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Last week ASIC announced temporary relief to:
- Facilitate advice about early access to super,
- Extend the timeframe for providing time-critical statements of advice (SOAs),
- Allow a Record of Advice (ROA) to be provided in certain circumstances.
For more information, please visit this link. The measures were also welcomed by the Federal Government, in a statement from the Assistant Minister for Superannuation, Financial Services & Financial Technology, Senator the Hon Jane Hume.
The FSC is regularly engaging with regulators and the Government and communicating relevant developments to members. If there is an issue we can assist with please, do not hesitate to contact us.
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ASIC’s FAQ for Financial Advisers and Licensees
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ASIC recently published an FAQ for financial advice. For more information, please see here.
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The Financial Adviser Standards and Ethics Authority (FASEA) Guidance
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Thanks to the input of the Adviser Competency Working Group, the FSC has provided specific points of clarification to ensure the Guidance is more workable and effective. Members will be kept up to date on developments and a bilateral meeting will be scheduled soon.
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Get involved with the Future of Advice project
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There has never been a more important time to shape the future of financial advice.
The FSC’s Future of Advice project is well underway. Please spread the word by liking and sharing our page and send content through that you think should be part of the discussion.
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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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- The FSC joined with other global funds management associations to write to the OECD to request a relaxation of rules that permit fund managers to obtain tax treaty benefits on behalf of investors. The relief requests include allowing the use of electronic documents and electronic signatures and extending deadlines.
- The FSC will send a copy of the letter to the ATO, requesting the ATO provide similar relief. A copy of the OECD letter has been sent to the FSC Tax Expert Group.
- The FSC is in the process of organising a meeting with the ATO to discuss FSC requests for deferral and flexibility relating to tax administration including:
- Implementation of version 13 of the Annual Investment Income Report
- The response to the Burton v Commissioner case;
- The ATO’s top 1000 and top 100 reviews, including Streamlined Assurance Reviews;
- Processing release authorities;
- Flexibility around eligibility for ‘widely held’ test for managed funds;
- Allowing electronic signatures where the law requires hard copy ‘wet’ signatures;
- Allowing early cut-off in distributions; and
- The issues raised in the OECD letter (see previous item).
- The early release of superannuation measure has raised questions about whether superannuation funds will still be eligible to be classified as Qualifying Foreign Pension Funds (QFPF) for US tax purposes, providing exemption from specific US tax liabilities. Clarification is being sought from the US IRS on this issue and the FSC Tax Expert Group will be kept informed about this issue.
- A similar issue may occur with classification as Qualifying Recognised Overseas Pension Scheme in the United Kingdom.
- The turnover test for eligibility for the JobKeeper payment is based on the GST definition of turnover, which excludes input taxed supplies. A member meeting has been organised to discuss this and other issues relating to the JobKeeper payment, see the regulation section above.
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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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ASIC updates guidance on internal market making and Information Sheet 230
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ASIC has updated Information Sheet 230 and guidance on internal market making. The update outlines a number of measures firms should take to manage market integrity risks associated with internal market making and provides guidance on improving internal market making practices.
Further details are available in the media release and the updated Information Sheet 230.
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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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LEGAL
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RG 97: Platforms Review and PDS Transition Dates
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In its regulatory relief announcement, ASIC also made comment concerning RG97. In summary:
- In relation to platform consultation, ASIC proposed to issue a platform fees consultation paper. The purpose was to establish a standardised approach to fees and costs disclosure for platforms. ASIC has said that it will continue to develop its proposals on fees and costs disclosure for platforms. However, ASIC is deferring the public consultation paper until further notice;
- In relation to RG 97 generally, ASIC is currently working on amendments to address issues that have arisen since the release of the revised Regulatory Guide 97. ASIC is also considering amending the transitional arrangements for Product Disclosure Statements (PDSs) to allow entities to come into the new disclosure regime from 30 September 2020 and requiring any PDS given after 30 September 2022 to comply with the new disclosure regime;
- In relation to surveillance of compliance with existing RG97 for superannuation, ASIC has said that it is continuing to monitor and may act where it identifies non-compliance with the current regime. However, ASIC is deferring its review to align with the timing of the implementation of the revised fees and costs disclosure requirements;
- The FSC continues to engage with ASIC in relation to issues associated with periodic statements for MIS products.
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Impact of COVID-19: ASIC Letter to Responsible Entities (REs)
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ASIC has written to REs of registered managed investment schemes concerning an RE’s duties and legal obligations to members considering the potential issues arising from COVID-19. ASIC reminded REs that they must comply with the law and their licensee duties, as well as exercise their powers and carry out their duties in the best interests of scheme members.
ASIC noted that it anticipates that REs will actively manage scheme liquidity. Where a scheme does become non-liquid, ASIC has powers to grant hardship relief and rolling withdrawal relief on a case by case basis. If a registered scheme becomes non-liquid or if redemptions are suspended, affected REs should contact ASIC This email address is being protected from spambots. You need JavaScript enabled to view it..
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Impact of COVID-19: APRA: temporary suspension of issuing of new licences
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APRA has written to applicants for new banking, insurance or superannuation licences to advise that it is temporarily suspending the issue of new licences for at least six months, given the economic uncertainty created by COVID-19. The letter states that:
Experience has shown that it is challenging for new entrants to succeed even under normal economic conditions, which is why APRA does not consider it prudent to license APRA-regulated entities at this time.
As the operating environment stabilises, APRA will keep its approach under review and advise current applicants when the granting of licences will restart. However, APRA expects this temporary hold could last at least six months and delay APRA licences by at least this timeframe. During this time, APRA will continue to assess current licence applications so the delay on launching when the hold is lifted is minimised.
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Impact of COVID-19: ASIC focus on COVID-19 challenges
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As noted above, ASIC has previously stated it would temporarily change its regulatory work and priorities to allow it and regulated entities to focus on the impact of COVID-19. This included the deferral of some activities and redeployment of staff to address issues of immediate concern, including maintaining the integrity of markets and protecting vulnerable consumers. Accordingly, until 30 September 2020, ASIC focus will primarily be on matters where there is a risk of significant consumer harm, serious breaches of the law, risks to market integrity and time critical matters. ASIC will continue its enforcement activities and act where the public interest warrants it to do so against any entity or person who breaks the law.
ASIC also has reminded the industry that:
...financial services and credit licensees and participants in financial services markets continue to have legal obligations including, where applicable, to:
- Act fairly, honestly and efficiently;
- Report material breaches of the law;
- Maintain records of the financial services they provide; and
- Ensure appropriate supervision of the provision of financial services and credit activities, even where staff are working remotely.
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Impact of COVID-19: APRA-regulated entities and capital management
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Given the economic disruption generated by the pandemic, APRA has written to all authorised deposit-taking institutions (ADIs) and insurers, including foreign subsidiaries, indicating that:
During at least the next couple of months, APRA expects that all ADIs and insurers will:
- Take a forward-looking view on the need to conserve capital and use capacity to support the economy;
- Use stress testing to inform these views, and give due consideration to plausible downside scenarios (periodically refreshed and updated as conditions evolve); and
- Initiate prudent capital management actions in response, on a pre-emptive basis, to ensure they maintain the confidence and capacity to continue to lend and support their customers.
APRA also has indicated its expectation that ADIs and insurers will limit discretionary capital distributions in the months ahead. If a board is confident it can approve a dividend based on robust stress testing results discussed with APRA, dividends should be at a materially reduced level. Payments should be offset where possible by using dividend reinvestment plans and other capital management initiatives. APRA also expects ADIs and insurers to appropriately limit executive cash bonuses.
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Impact of COVID-19: Australian Financial Complaints Authority (AFCA): Time to respond to complaints
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AFCA, after liaison with ASIC, has announced that due to the COVID-19 pandemic additional time is being given to consumers, small businesses and financial firms to respond to complaints. This takes the form of an additional nine days,
This nine-day extension comes into effect immediately and applies to all complaints, including those relating to financial difficulty. Financial firms currently have 21 days to respond when AFCA notifies them that a complaint has been lodged. With the extension period, they will now have 30 days.
AFCA ALSO has stated that it:
...is taking a flexible approach to assisting all parties to a dispute in these difficult times. AFCA is also providing as standard, a flat 21-day timeframe to provide an initial response, once the dispute reaches the case management stage.
AFCA has indicated that these changes are a temporary measure which it anticipates will be in place for up to six months and will be reviewed and adjusted as appropriate. Internal dispute resolution refer back timeframes remain unchanged.
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ASIC recently has exercised two new powers granted it as a result of regulatory reform.
Product Intervention Powers
On 20 September 2019, Cigno Pty Ltd (Cigno) filed a judicial review application in the Federal Court seeking to challenge ASIC’s product intervention order in respect of short-term credit. Cigno’s application was dismissed by the Court and the product intervention order thus remains in force.
Banning Powers
A financial adviser who was sentenced to ten years imprisonment for fraud offences has been permanently banned from having any involvement in financial services and credit activities.
This is the first use by ASIC of the recent extensions to its banning powers, which were effective from 18 February 2020. The Financial Sector Reform (Hayne Royal Commission Response—Stronger Regulators (2019 Measures)) Act 2020 empowers ASIC to ban individuals not only from providing financial services or engaging in credit activities, and more broadly from performing any function involved in:
(a) the engaging in of credit activities; or
(b) the carrying on of a financial services business.
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London Inter-Bank Offered Rate (LIBOR) transition: APRA and ASIC
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APRA and ASIC have given feedback to selected major Australian financial institutions in relation to how these institutions are preparing for the end of LIBOR in 2021. ASIC previously asked (in May 2019) major financial institutions for information in this regard.
Importantly, the comments include a general assessment by ASIC and APRA of transition preparations, related recommendations and a plan for ongoing engagement on these issues. APRA also made recommendations regarding best practice for prudential and conduct risk mitigation measures These included the following observations that institutions:
- Create a formal transition program identifying risks, mitigation strategies and relevant timelines;
- Comprehensively assess and quantify how LIBOR affects the institution’s business;
- Consider conduct related issues including the potential for conflicts of interest, fair treatment of clients and asymmetry of information;
- Ensure clients are aware of practical transition risks; and
- Seek legal advice on contract amendment and fall-back provisions early.
The “Dear CEO “letter also notes that ASIC, APRA and the Reserve Bank of Australia will continue to promote awareness of the need to plan for the LIBOR transition and mitigate risks to market stability. ASIC and APRA have acknowledged that disruptions caused by COVID-19 may affect transition plans. Institutions are invited to contact the ASIC Benchmarks team with any further questions or feedback.
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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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