Welcome to Issue 35 of the FSC Policy Update – a fortnightly member briefing on the main legislative and regulatory changes across the financial services industry.
This past week the FSC contributed to the national policy debate by releasing our Accelerating Australia’s Economic Recovery report. This has been the focal point for our discussions with the Government and the public service over the past week.
Parliament resumed on 10 June for a two-week sitting period. In addition to a measure to amend the timeline for complying with FASEA requirements, the Government also listed the ‘Your Super, Your Choice’ Bill for debate in the Senate and the ‘More Flexible Super’ Bill for debate in the House of Representatives. These bills are progressing but have not yet passed Parliament.
The Government has also advised that it will provide an economic update in late July, in advance of the Budget on 6 October. We expect the COVID-19 response will continue to dominate the economic agenda.
On 5 June, substantive and important reforms to the framework for review of foreign investments in Australia were announced by the Treasurer. The reforms focus, especially on sensitive national security-related businesses. These legislative changes will commence on 1 January 2021. The Government has indicated that in order to ensure a seamless transition to the new rules, the temporary changes in response to the Covid-19 pandemic will remain operative until the end of 2020.
On 11 June, ASIC released a revised timetable of ongoing work and interim corporate plan 2020-21. These documents contain some impacts for our industry and we mention these were relevant in this update.
To share any feedback with the FSC about these issues, please email the team.
Blake Briggs, FSC Deputy CEO
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Click on the topic of interest below to read more
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Design and Distribution Obligations (DDO)
Product Intervention Powers (PIP)
ASIC's Interim Corporate Plan 2020-21 – Life insurance update
Updates on the implementation of Unfair Contract Terms (UCT) legislation
FSC advocacy to make it easier to access scaled advice
ASIC’s temporary relief for financial advice to end on 15 October
ASIC's Interim Corporate Plan & Financial Advice
Further advocacy for affordable and accessible financial advice
Enhanced regulatory sandbox regulations for fintech take effect from September
Draft Guidance Note on Improving Gender Diversity in Asset Management (Draft Guidance Note)
ASIC’s revised timetable of ongoing work and interim corporate plan 2020-21
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PARLIAMENT, LEGISLATION AND REGULATION
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Design and Distribution Obligations (DDO)
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The ASIC Interim Corporate Plan indicates that ASIC plans to release the regulatory guide on the DDO regime in the third quarter of 2020 (i.e. after 30 June).
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Product Intervention Powers (PIP)
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The ASIC Interim Corporate Plan states that ASIC will publish a regulatory guide on the PIP regime in June 2020 explaining how ASIC plans to use this power.
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SUPERANNUATION
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The Australian Taxation Office (ATO) has provided a discussion paper in relation to identity verification requirements, which must be met to use the SuperMatch service. The paper outlines new requirements that will be incorporated into an updated set of terms and conditions.
The ATO is seeking feedback on its proposed approach, and the FSC will be working with members to provide a response.
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LIFE INSURANCE
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ASIC's Interim Corporate Plan 2020-21 – Life insurance update
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ASIC’s newly released interim corporate plan and revised timetable for ongoing work includes a number of items of interest for life insurance. These include:
- Targeted consultation on a draft information sheet for claims handling as a financial service has been pencilled in for September 2020.
- Consultation on changes to RG 38 The Hawking Prohibitions scheduled for late 2020.
- Consultation on an information sheet about the deferred sales model for add-on insurance scheduled for late 2020.
- Value of insurance in superannuation report anticipated to be published in December 2020.
- Consultation on changes to RG 183 Approval of financial sector codes of conduct will take place Q2 2021 with targeted consultation intended at an earlier stage.
ASIC intends to update this table to allow for any future changes to its listed schedule of work. The interim plan and revised timetable can be accessed through the following link here.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. or Aidan Nguyen for more information.
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Updates on the implementation of Unfair Contract Terms (UCT) legislation
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Following confirmation from Treasury of no changes to the UCT legislative timeline, we have turned our attention to supporting life insurers with implementation.
- FSC has set up a dedicated Working Group to assist the industry with the implementation of the legislation and will be meeting fortnightly. The initial focus of the working group is on developing a list of the key issues that can be addressed at an industry level.
- FSC is planning a UCT workshop with members in early July. Further updates on this event will be shared when available.
- ASIC has commenced a desktop review for the new UCT legislation across both general and life insurance. ASIC anticipates this review to occur as a phased approach for general insurance and then life insurance. ASIC is currently in the scoping phase for life insurance and may liaise further with industry as this review progresses.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. or Aidan Nguyen for more information.
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ADVICE
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FSC advocacy to make it easier to access scaled advice
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A key proposal of the FSC’s Accelerating Australia’s Economic Recovery report released earlier this month is a two-year reform to make it easier for Australians to access scaled financial advice. Scaled advice would be documented through a Record of Advice allowing clients to seek advice on a specific subject, such as the impact of redundancy or a hardship withdrawal from superannuation. Learn more about our plan here.
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ASIC’s temporary relief for financial advice to end on 15 October
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ASIC has announced the Legislative Instrument (LI) enabling the relief it made in light of COVID-19 will be repealed on 15 October. The Regulator says ASIC will continue to monitor the appropriateness of these temporary relief measures. If it considers it appropriate to end the relief before the six-month period or extend the relief, ASIC will give sufficient notice before any early repeal or extension is implemented.
Access the LI here.
Read ASIC’s media release announcing this change here.
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ASIC's Interim Corporate Plan & Financial Advice
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While ASIC has deferred some of its existing work on financial advice, ASIC’s interim corporate plan released last week includes a number of projects it will conduct:
- Relief surveillance: ASIC will conduct surveillance of financial advice to ensure that its temporary relief measure to improve access to timely and affordable financial advice is working (see ASIC Corporations (COVID-19—Advice-related Relief) Instrument 2020/355).
- Unlicensed advice: Through an ASIC-wide working group, ASIC plans to identify unlicensed advice, expand its unlicensed advice regulatory toolkit and take action against misconduct
- Reference checking and information sharing: Consultation on a draft Legislative Instrument (LI) and information sheet for reference checking and information sharing and Regulatory Guide 104 Licensing: Meeting the general obligations; Regulatory Guide 205 Applying for and varying a credit licence. ASIC intends to consult on this in October this year.
- Breach reporting: ASIC will consult on an update to Regulatory Guide 78 Breach reporting by AFS licensees on revised breach reporting requirements and on a new information sheet about new requirements for financial advisers and mortgage brokers to investigate misconduct and notify and remediate affected clients. ASIC intends to consult on this in early 2021.
A full copy of ASIC’s Interim Corporate Plan is available here.
ASIC’s revised timeline is available here.
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Further advocacy for affordable and accessible financial advice
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The FSC is working with the Financial Planning Association of Australia (FPA) and Association of Financial Advisers (AFA) on solutions to reduce unnecessary cost and duplication within the advice landscape. It will inform advocacy to support the financial advice industry make advice more for affordable and accessible for Australian consumers.
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Enhanced regulatory sandbox regulations for fintech take effect from September
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Regulations implementing the Government’s enhanced regulatory sandbox for Fintech take effect from 1 September. Importantly, AFSL holders can apply for an exemption under the sandbox if their application pertains to something beyond the services or products their existing AFSL allows them to provide.
The Regulations mean an extended exemption period from 12 to 14 months and a broadened range of products for market testing. ASIC also may attach conditions on the granting of exemptions and these can now apply to specific elements of an existing product or service.
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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
- The FSC made a submission to the ATO on the ATO’s response to the Burton case, which relates to the Foreign Income Tax Offsets (FITOs). The submission argued the ATO’s view does not reflect current industry practice, would result in over-taxation of some foreign capital gains and would be difficult for fund managers to implement.
- The FSC met with the Board of Taxation in relation to its review of capital gains tax (CGT) rollover relief provisions. The FSC raised the rollover issues related to product modernisation and the recently legislated rollover relief for merging super funds.
- The FSC will develop a submission to the Board of Taxation on these issues.
- The FSC released the report - Accelerating Australia's Economic Recovery (see the summary at the start of this update). The report includes a number of tax recommendations including removing State and Territory stamp duties on both property and insurance; reducing the corporate tax rate to 25% for all businesses, and addressing a wide range of tax issues for fund managers/investors.
- The ATO has informed the FSC that it is continuing to consider issues with managed funds that lose their ‘widely held’ status due to substantial redemptions.
- The FSC is finalising a paper on the issues with the taxation of death benefit rollovers, detailing the concerns that the legislation purporting to fix this issue (Treasury Laws Amendment (2019 Measures No. 3) Bill 2019) does not work correctly. If an amendment to fix these issues does not occur, the FSC requests the ATO to provide public guidance on administrative solutions to the problems.
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Stamp Duty
- The FSC wrote to all States and the Northern Territory except New South Wales to request the jurisdictions provide stamp duty assistance relating to the premium relief life insurers have provided due to COVID-19.
- The FSC requested the States and the Northern Territory mirror the assistance recently announced in New South Wales on this issue.
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INVESTMENTS
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The Exchange-traded Funds (ETF) Working Group met last week, with Andrew Weaver from ASX Ltd (ASX) providing an ASX ETF update to the Working Group. The Working Group is also exploring the performance of ETFs during COVID and considering international developments on ETF naming conventions.
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Draft Guidance Note on Improving Gender Diversity in Asset Management (Draft Guidance Note)
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The Diversity Working Group is continuing work on the Draft Guidance Note which was considered by the Investment Board Committee at its last meeting at the end of April.
Following feedback from the Board Committee, further refinements to the Draft Guidance Note have been proposed and the Working Group will be convening on 15 June to consider these.
The FSC hopes to finalise the Draft Guidance Note in the coming months and we look forward to providing you with a further update on this soon.
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LEGAL
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As readers would be aware of previous issues, given the challenges of COVID-19, AFCA has paused the release of its Fairness Consultation Paper whilst it focuses on resolving complaints.
In a recent communication with stakeholders, AFCA outlined its current and proposed activities in this area.
AFCA summarised the themes emerging from the stakeholder round table sessions (held pre-pandemic) as follows:
- strong support for AFCA’s work on the Fairness Project
- support for the development of an engagement charter to provide guidelines for conduct for all parties, including AFCA
- support for the rollout of template settlement agreements, particularly in matters involving smaller financial firms
- ways to improve our approach to procedural fairness
- areas where additional guidance or approach documents would be useful
AFCA also indicated that it is actively considering stakeholder feedback and are continuing to develop the Fairness Framework. Matters being considered include:
- a proposed engagement charter,
- The pilot of template settlement deeds across a number of product areas, and
- a review of resources that underpin AFCA’s procedural fairness and consistency in decision-making.
The FSC will continue to monitor this project and advise members when we become aware of significant developments.
The relevant AFCA link for this project is here.
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ASIC’s revised timetable of ongoing work and interim corporate plan 2020-21
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As noted above, on 11 June, ASIC released these documents. Some matters of note include the following:
- Internal dispute resolution (IDR): ASIC has been reviewing IDR standards to align with new statutory requirements for IDR, reflect the standards for effective complaints handling in AS/NZS 10002:2014 and refine its requirements in some key areas based on its experience in administering the policy. ASIC now proposes to publish a new regulatory guide, RG 271 Internal dispute resolution, outlining updated IDR standards and requirements. ASIC has said that RG 271 will be published in July 2020 to allow the industry to make the necessary changes ahead of commencement on 5 October 2021. ASIC has noted that given increased levels of financial hardship and consumer vulnerability as a result of the COVID-19 pandemic, ASIC considers that it is essential that IDR performance is significantly improved.
- Remediation policy review: As previously mentioned, ASIC will undertake a consultation on proposals to extend the application of its remediation policy in Regulatory Guide 256 Client review and remediation conducted by advice licensees (RG 256) beyond financial advice. In 2019, ASIC commenced an internal review of RG 256. ASIC has said that its focus has been on extending the application of the policy, including greater transparency on the progress and outcomes of remediation, and providing best practice guidance for designing and conducting consumer-centred remediation. The consultation will occur in Q3 2020.
- Internal dispute resolution data collection and reporting: Consultation will commence in Q3 2020 on the second phase of our targeted consultation on IDR data collection and reporting. ASIC has said that this consultation will build on the feedback that industry and consumer stakeholders provided in response to Consultation Paper 311 Internal dispute resolution: Update to RG 165.
- Commencement of changes to fees and costs disclosure requirements for managed funds and superannuation: Regulatory Guide 97 Disclosing fees and costs in Product Disclosure Statements (PDSs) and periodic statements (RG 97): There is a further chapter in the long-running saga of RG 97, ASIC now has confirmed that the PDS transition period is to be extended. This will occur by way of a Legislative instrument, allowing issuers to come into the new disclosure regime from 30 September 2020 and require any PDS given on or after 30 September 2022 to comply with the new disclosure regime. There will be no change to the periodic statement transition arrangements. A media release will be issued and the RG 97 webpage updated when the amendment is made.
- Financial Services Royal Commission recommendations: 1.6 Misconduct by mortgage brokers. 8 Reporting compliance concerns. 2.9 Misconduct by financial advisers. 7.2 Implementation of Enforcement Review Taskforce recommendations: In February 2021, ASIC will consult on an update to Regulatory Guide 78 Breach reporting by AFS licensees on revised breach reporting requirements and on a new information sheet about new requirements for financial advisers and mortgage brokers to investigate misconduct and notify and remediate affected clients. ASIC notes that this timeline is contingent on the Government’s timing of introduction of the Bill into Parliament.
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