Welcome to Issue 41 of the FSC Policy Update – a fortnightly member briefing on the main legislative and regulatory changes across the financial services industry.
The FSC was pleased to host an event with the Shadow Minister for Financial Services, Stephen Jones MP, last Friday to discuss a range of issues with FSC members that are impacting the financial services industry.
The Minister's views on superannuation, life insurance and the delayed implementation of the Royal Commission recommendations provided important guidance on future political debates and their impact on the industry.
In this issues, the team explores the passing of Your Super, Your Choice legislation, the FSC - KPMG Lump Sum (LS) Industry Standard Table Event and ASIC’s New relief measures to facilitate hardship relief during COVID-19.
Blake Briggs, FSC Deputy CEO
.
.
Click on the topic of interest below to read more
.
Design and Distribution Obligations (DDO) update
APRA Data Transformation consultation resumes
Your Super, Your Choice legislation passes
APRA releases quarterly life insurance statistics for June 2020
FSC - KPMG Lump Sum (LS) Industry Standard Table Event
FASEA consultation on Education Legislative Instrument (LI)
ASIC update - New relief measures to facilitate hardship relief during COVID-19
ASIC commences proceedings against AFSL holder in relation to cyber security systems
.
PARLIAMENT, LEGISLATION AND REGULATION
.
.
Parliament sat for the last two weeks, the last sitting before the delayed Federal Budget, which will be handed down on 6 October.
Superannuation remained a prominent issue, with extensive debate in Parliament on the currently legislated Superannuation Guarantee increase, and the prominent intervention in the debate by two former Prime Ministers, Paul Keating and Kevin Rudd. We expect this issue to continue to receive attention in the lead up to the Budget, notwithstanding the bigger economic issues arising from the impact of COVID-19 induced shutdowns on the economy.
The FSC has continued to liaise with the Victorian Government to represent companies impacted by Stage 4 restrictions. The FSC is advocating for financial services companies to be included in the category of employers that can re-open with ‘COVID-safe plans’ as the Government eases restrictions given the resources our sector has to implement and enforce these plans.
The Senate also passed the long-delayed ‘Your Super, Your Choice’ Bill, allowing all Australians to choose their superannuation fund. The FSC has consistently advocated for this reform for 7 years, a clear indication of how hard-fought simple changes to the system can be.
On 2 September, legislation was introduced to Parliament to increase the maximum number of SMSF members to six, a measure announced in the 2018-19 Budget.
.
Design and Distribution Obligations (DDO) update
.
FSC members are continuing to develop template Target Market Determinations (TMDs) for
- superannuation wraps
- funds management
- life insurance
The FSC met with several organisations representing financial advisers on DDO issues, and in response to requests - the funds management and life insurance templates are with advisers and advice licensees for comment.
The FSC has also set up a new expert group to discuss the technology issues related to the DDO regime including the options for standardising the IT systems across the FSC membership.
.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
SUPERANNUATION
.
APRA Data Transformation consultation resumes
.
On 28 August, APRA released a consultation package relating to several new sections of the Superannuation Data Transformation.
The consultation package contains topic papers, draft reporting standards and data collection templates covering four areas:
- Fees and costs;
- Insurance arrangements;
- Expense reporting; and
- Asset allocation.
The FSC will be providing feedback on these issues through the Data Transformation Working Group as well as participating in industry forums.
.
Your Super, Your Choice legislation passes
.
On 25 August, the Senate passed the Treasury Laws Amendment (Your Superannuation Your Choice) Bill 2019 – the choice of fund bill.
The legislation passed with the following amendments:
- From the Government, an amendment to apply the legislation to agreements made from 1 January 2021 (previously 1 July 2020).
- From newly independent Senator Rex Patrick, an amendment to require APRA to undertake a review of the operation of the scheme and report to Government.
The FSC welcomed the long-overdue passage of this legislation.
.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
LIFE INSURANCE
.
APRA releases quarterly life insurance statistics for June 2020
.
APRA recently released its Quarterly Life Insurance Performance Statistics publication for the June 2020 quarter.
In response, the FSC issued a media release noting another quarter of losses for income protection results. Read more here.
.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
.
The FSC has written to the Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume, following the Minister’s indication that Government would be open to considering a pilot to examine the benefits that could be delivered for early intervention.
The FSC has established a dedicated working group to develop the design of the pilot with a view towards addressing stakeholder concerns raised in the 2018 PJC Inquiry.
.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. or Aidan Nguyen for more information.
.
FSC - KPMG Lump Sum (LS) Industry Standard Table Event
.
The FSC and KPMG will be presenting an insights session on the graduation of the new LS Industry Standard Table. In addition to the lump sum experience investigation results released one month ago, this represents another important moment in the data collection project. The table comprises extensive data collection and analysis, based on close to 30,000 claims from the 2016-2018 investigation period.
Full life insurance members are invited to attend the following session scheduled for Thursday 24 September from 1.00pm – 2.00pm. Register here.
.
Please contact Aidan Nguyen for more information.
.
ADVICE
.
FASEA consultation on Education Legislative Instrument (LI)
.
FASEA has opened consultation on draft amendments to the Corporations (Relevant Providers Degrees, Qualifications and Courses Standard) Determination 2020 for financial advice. The draft amendments include approvals post registration of the 2020 determination as follows:
- approval of a number of current degrees and bridging courses
- approval of historic degrees
- approval of credit for coursework to attain a professional designation
- recognition of 2 credits for existing advisers who have completed both a relevant degree and a post graduate relevant degree.
More information is available in FASEA’s media release available here. The draft proposals and Legislative Instrument is available here. Any FSC feedback will be informed by the Adviser Competency Working Group.
.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
TAX
.
.
- The FSC wrote to the ATO raising concerns with the ATO’s information requests that have been sent to managers of larger Australian managed funds, focusing on the unreasonableness of the requests, privacy problems with obtaining some requested information, and information requests that are suitable for companies but not managed funds.
- The FSC joined with other associations representing the funds management industry to make a representation to the UN in support of proposed changes to the model tax convention. The changes allow managed funds to access treaty relief on behalf of fund members, or to access treaty relief directly in certain cases.
- The FSC provided comments on a draft article by the ATO on the tax treatment of the rollover of death benefits. The FSC has requested that the article be shared widely with superannuation funds and life insurers, and that the ATO make a commitment that it will not take compliance action against funds and insurers that follow the approach in the article.
- The FSC provided feedback to the Treasury on unresolved tax issues relating to Royal Commission recommendation 3.1 (the requirement to split REs and RSEs).
- The ATO issued a tax ruling on Foreign Income Tax Offsets (FITOs) and the source of net capital gains, TD 2020/7. The FSC made a submission on a draft of this ruling. In the final ruling, the ATO has largely not changed its views. The FSC response to this ruling will be considered further.
- The FSC met with the Inspector-General of Taxation (IGOT), Karen Payne, and conveyed:
- Member concerns about the extensive and onerous information requests that the ATO are imposing on fund managers.
- The delays the FSC has had in receiving ATO advice on how the Burton case (about FITOs) would apply to managed funds.
- Our strongly support for a proposed review by the IGOT into the tax administration for unitised trusts.
- The FSC wrote to the Assistant Treasurer reiterating concerns over unenacted legislation, particularly the Corporate Collective Investment Vehicle, product modernisation, and reforms to the Taxation of Financial Arrangements.
.
Insurance taxes
.
- The FSC held a first joint meeting with the Insurance Council of Australia (ICA) to discuss tax issues of common concern, and agreed to set up a joint working party on these issues.
- The first work of this FSC-ICA working party will be to develop a joint submission to the New South Wales Productivity Commission recommending the Commission support the abolition of insurance duties.
.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
INVESTMENTS
.
Consultation Paper on the Development of The CFA Institute ESG Disclosure Standards for Investment Products
.
The CFA Institute is seeking feedback on its proposed voluntary industry ESG Disclosure Standards for Investment Products. The proposed Standard will seek to ‘provide greater transparency and comparability for investors by enabling asset managers to clearly communicate the ESG-related features of their investment product’. The ESG Working Group will prepare a submission to the consultation which is due on 19 October.
After the initial consultation, the CFA proposes to develop a draft version of the Standard to be released in May 2021.
The CFA consultation paper can be found here.
.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
ASIC update - New relief measures to facilitate hardship relief during COVID-19
.
ASIC last week announced the progress of their work regarding hardship relief for frozen funds and issued a new legislative instrument; ASIC Corporations (Hardship Withdrawals Relief) Instrument 2020/778, providing conditional relief that assists Responsible Entities (REs) of frozen funds to allow members to withdraw on hardship grounds.
ASIC previously granted hardship relief to REs of frozen funds on a case-by-case basis only.
The legislative instrument outlines the circumstances to which the relieve applies. Where a RE is unable to rely on the legislative instrument due to its circumstances, the RE may also apply to ASIC for case by case hardship relief with further information outline in Regulatory Guide 136.
Further details, as well as link to the relevant instrument, are included in the ASIC update here .
.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
.
LEGAL
.
.
ASIC has released its Corporate Plan for 2020-24. This details ASIC's strategic priorities and actions over the next four years. The Plan indicates ASIC's likely areas of focus and its approach to its supervisory, surveillance and enforcement functions. It also sets out these may have been impacted by the COVID-19 pandemic.
See more here.
The Media Release accompanying the issue of the Plan summarises the Plan and notes that the Plan focuses on
the impact of the COVID-19 pandemic as well as longer term threats and harms in our regulatory environment. A key consideration in all our work is the extent to which we are supporting the long term recovery of the Australian economy.
ASIC’s immediate work to address the COVID-19 pandemic will be guided by five strategic priorities:
- protecting consumers from harm at a time of heightened vulnerability;
- maintaining financial system resilience and stability;
- supporting Australian businesses to respond to the effects of the COVID-19 pandemic;
- continuing to identify, disrupt and take enforcement action against the most harmful conduct; and
- continuing to build organisational capacity in challenging times.
ASIC states that its longer term focus areas include:
- promoting confident participation in the financial system to support long term economic recovery;
- deterring poor behaviour and misconduct through the ‘Why not litigate?’ approach and driving cultural change using all available regulatory tools;
- improving entities’ management of key risks to prevent and mitigate harms to consumers and promote a healthy financial system and economic growth;
- addressing consumer harm as a result of elevated debt levels and hardship, with a particular focus on predatory lending;
- reducing poor product design and restricting mis-selling;
- reducing misconduct by company directors and professional service providers; and
- delivering as a conduct regulator for superannuation.
.
ASIC commences proceedings against AFSL holder in relation to cyber security systems
.
ASIC has announced that it commenced Federal Court proceedings against an Australian Financial Services Licence holder (AFSL) in relation to the alleged failure of the AFSL to have adequate cyber security systems. In the proceedings, ASIC is seeking a declaration of contravention of the AFSL’s obligations, the payment of civil penalties and compliance orders.
The AFSL had appointed a number of authorised representatives, (ARs). ASIC contends that the AFSL was aware of a number of cyber security incidents involving its ARs. This included an incident where a malicious user gained extended access to servers containing confidential client information, resulting in several clients reporting unauthorised use of their personal information.
ASIC argues that the AFSL failed to have implemented (including by its ARs) adequate policies, systems and resources which were reasonably appropriate to manage risk in respect of cybersecurity and cyber resilience. Further, it did not initiate sufficiently broad changes or implement changes in a sufficiently timely manner.
.