Welcome to Issue 42 of the FSC Policy Update – a fortnightly member briefing on the main legislative and regulatory changes across the financial services industry.
With three weeks until the Federal Budget is handed down on 6 October, the Government has flagged accelerated personal income tax cuts, tax incentives for businesses to support economic growth and further support for pensioners.
The FSC will provide members a detailed briefing on the Budget the night of its release. I am also pleased to be hosting Senator Jane Hume, the Assistant Minister for Financial Services and Superannuation, in an online industry discussion on the Budget on 8 October (FSC member-only event).
In this issue, the FSC team analyses a number of issues including the APRA Consultation on Superannuation Data Transformation, the Implementation of FSC Standard 26 and the FSC Operational Due Diligence Guidance Note 37 (GN37).
Blake Briggs, FSC Deputy CEO
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Click on the topic of interest below to read more
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Critical Infrastructure Regulation
Design and Distribution Obligations (DDO) update
APRA Consultation on Superannuation Data Transformation
Lump Sum Graduation of Industry Standard Table Virtual Event
Implementation of FSC Standard 26
Life Insurance Industry Awards 2020
FASEA to provide remote option for October financial adviser exam sitting Melbourne
FASEA has confirmed dates and venues for 2021 exam sittings
Registration for the Future of Advice Summit now open
FSC Operational Due Diligence Guidance Note 37 (GN37)
FSC appearance before Parliamentary Inquiry – discussion about foreign investment reforms
COVID-19 and the Electronic Witnessing of Documents in New South Wales (NSW)
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PARLIAMENT, LEGISLATION AND REGULATION
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Critical Infrastructure Regulation
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The FSC made a submission to the Department of Home Affairs in relation to Protection of Critical Infrastructure. The submission argued the proposals should be co-designed with financial services businesses and regulators, acknowledge the very high rate of regulatory change in financial services, and use existing financial services regulations relating to information security.
The submission also requested further details about the application of the changes to financial services, including why it might apply to smaller financial service businesses, to custodians as well as fund managers, and to infrastructure owners as well as infrastructure operators. The final submission has been shared with relevant Board Committees and Working Groups.
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Design and Distribution Obligations (DDO) update
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FSC members continue to develop template Target Market Determinations (TMDs) for funds management, superannuation wraps, and life insurance products. The template for superannuation master trusts will be developed shortly based on the template for superannuation wraps.
The template TMDs for life insurance has been shared with FSC advice licensees for comment. The other templates will be shared with licensees when they are completed.
The FSC plans to share these templates with the wider adviser community when they are in a suitable state for sharing.
The FSC met with ASIC to discuss issues relating to the DDO regime. ASIC indicated the release of the final DDO RG is now targeted for October. A more detailed update on the discussions with ASIC has been provided to the FSC’s DDO Working Groups.
The first meeting of the FSC’s DDO technology solutions expert group was held, and discussed the options for developing a technology platform that could be used by FSC members (and others in the industry) to facilitate the information flows mandated by the DDO regime. The expert group will continue to meet weekly and will develop a detailed proposal for consideration by members.
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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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APRA Consultation on Superannuation Data Transformation
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Phase 1 consultations are currently open for APRA’s Superannuation Data Transformation. Of particular interest within the consultation to life insurers is Topic Paper 6 on insurance arrangements. The FSC's superannuation and life members will be meeting on Wednesday 23 September to discuss the FSC’s response to APRA.
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Lump Sum Graduation of Industry Standard Table Virtual Event
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The FSC and KPMG are pleased to present a free insights session on the graduation of the new Lump Sum (LS) Industry Standard Table for FSC’s life insurance members. 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.
The session will be held virtually on Thursday 24 September from 1:00pm - 2:00pm.
FSC members can register here.
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Implementation of FSC Standard 26
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The FSC will be preparing an FAQ document to assist insurers with some common implementation questions arising from the implementation of FSC Standard 26. The effective date for mandatory compliance to FSC Standard 26 is until six months from the determination that the COVID-19 pandemic has passed, or from 1 January 2021, whichever is the later.
Members are encouraged to send to the FSC any questions on the implementation of Standard 26 for the FSC to look to address in the FAQ document.
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Please contact Aidan Nguyen for more information on how life insurance members can get involved.
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Life Insurance Industry Awards 2020
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Each year the Life Insurance industry comes together to celebrate the achievements of individuals and teams in different areas.
In 2020, the FSC will be awarding excellence in FIVE categories:
- *NEW FOR 2020* BEST LIFE INSURANCE AWARENESS CAMPAIGN - Nominate now
- INNOVATION IN RETAIL LIFE INSURANCE - Nominate now
- INNOVATION IN GROUP LIFE INSURANCE - Nominate now
- LIFE INSURANCE YOUNG ACHIEVER - Nominate now
- LIFE INSURANCE INDUSTRY LEADER - Nominate now
Nominations close Friday 30 October 2020 (no extensions to be granted). The FSC encourages all eligible organisations and individuals to participate.
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ADVICE
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FASEA to provide remote option for October financial adviser exam sitting Melbourne
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Melbourne metropolitan physical location exams will not be offered for the October sitting due to exam closures and continued Stage 4 restrictions. Advisers who have registered for a Melbourne physical location exam will have the option to sit the exam online or defer to November or later sitting. The Bendigo exam location will continue to be offered to advisers in regional Victoria.
This measure is being taken given the evolving COVID-19 pandemic situation in Victoria and in the interests of all involved with the exam. FASEA has indicated the exam administrator, the Australian Council for Educational Research (ACER) will contact candidates registered for October Melbourne metropolitan exam sittings to explain their options to sit the exam. ACER requests candidates ensure their email addresses are up to date in the registration system to facilitate this contact. More information is available here.
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FASEA has confirmed dates and venues for 2021 exam sittings
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FASEA confirms that, subject to COVID-19 restrictions, it will run six Financial Adviser exam sittings in 2021 in 31 locations across metropolitan and regional Australia. Alternatively, advisers may elect to sit the exam online remotely at their preferred time during the exam sitting window. Details of exam dates and venues are available here. The 2021 exam sittings are in addition to remaining 2020 sittings to be held in October and November.
It is expected that FASEA’s revised Guidance on the Code of Ethics for financial advice will be issued this month. Following its release, the FSC will provide feedback developed through the Adviser Competency Working Group.
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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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Registration for the Future of Advice Summit now open
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Coinciding with the launch of the FSC’s Future of Advice Report, the FSC is holding a Future of Advice Summit which will feature industry, regulatory and academic leaders discussing Australia’s financial advice landscape and its future. The Summit will explore how to build a simpler and less costly financial advice system. Affordable and accessible financial advice for all is a critical component of Australia's economic recovery from the impact of COVID-19. Now, more than ever before, is the time for the industry to come together to unpack and analyse the most immediate challenges and opportunities on the horizon. This webinar will provide delegates with a highly engaging and interactive forum of conversations on addressing the most critical issues facing industry.
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EVENT DETAILS
DATE: Tuesday 20 October, 2020
TIME: 9.00am - 12.45pm
VENUE: Online
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REGISTRATION COST
MEMBER RATE: $100 + GST per person
NON-MEMBER RATE: $150 + GST per person
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TAX
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- The FSC and several members met with the ATO to discuss the ATO information requests as part of the Top 1000 reviews/Simplified Assurance Reviews. The FSC indicated where it would be hard for many fund managers to comply with information requests, or where the costs of complying would be disproportionately large. The FSC is compiling follow-up information in response to requests from the ATO at the meeting.
- The FSC has shared with members draft ATO documents on tax issues relating to remediation: guidance explaining the income tax consequences of individuals receiving underpaid interest; and a fact sheet explaining the withholding and reporting obligations of financial institutions relating to the payment of remediation.
- A member meeting is likely to be convened to discuss these draft materials on Wednesday 23 September.
- Tax Experts are considering the risks that capital gains tax will be imposed on non-residents investing through Managed Investment Trusts (MITs) that do not qualify as fixed trusts.
- Tax Experts are considering the implications of final tax ruling TD 2020/7 (see previous update) and the benefits of a Double Tax Agreement with Luxembourg.
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- The FSC made a submission to the New South Wales Productivity Commission in response to the Commission’s Green Paper Continuing the Productivity Conversation. The FSC argued the Commission should be bolder in its tax reform recommendations and recommend the abolition of life insurance duties. This would align with the recommendations of the draft report of the New South Wales Review of Federal Financial Relations, acknowledging the well-known disadvantages of insurance taxes including inefficiency, regressive impact, volatility, and high compliance and collection costs. The submission also argued for national harmonised payroll tax system and supported the Commission’s draft proposal to remove stamp duty on land taxation.
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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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FSC Operational Due Diligence Guidance Note 37 (GN37)
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The Australian Institute of Superannuation Trustees updated their Operational Due Diligence Guidance Note in June this year. The FSC Operational Due Diligence Working Group has recommended a number of changes to FSC GN37 to align with the AISTs Guidance Note. The updated draft will be sent to the Investment Expert Group and the Fund Management Board Commitee for their review and endorsement ahead of submission to the FSC Board for final approval.
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Consultation Paper on the Development of The CFA Institute ESG Disclosure Standards for Investment Products
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Following on from the previous update covering the CFA Institute’s consultation regarding ESG Disclosure Standards for Investment Products which relate to investment product disclosure, the ESG Working Group has begun to prepare a submission to the consultation which is due on 19 October. The CFA consultation paper 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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FSC appearance before Parliamentary Inquiry – discussion about foreign investment reforms
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The FSC recently appeared before a Parliamentary Inquiry into diversifying Australia’s trade and investment profile. The discussion at the inquiry had a particular focus on the FSC’s views on the Government in relation to foreign investment reforms.
On behalf of the FSC, Deputy CEO, Blake Briggs and Senior Policy Manager, Economics & Tax, Michael Potter, noted that the foreign investment changes would result in significant additional red tape for global fund managers and put forward the case for an exemption to facilitate legitimate activities of fund managers which invest billions of dollars into Australia.
The FSC’s appearance at the inquiry was featured in an Investor Daily article here.
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LEGAL
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Australian Law Reform Commission (ALRC): inquiry into simplification of financial services regulation laws
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In a recent announcement the ALRC, indicated that it will inquire into simplifying Australian financial services regulation laws. The inquiry is part of the Government’s response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry released in February 2019. In this respect the ALRC has said:
The ALRC is not tasked with recommending policy changes regarding the content of obligations on financial service providers. Rather, the inquiry is more technical in nature, and seeks to facilitate a more adaptive, efficient, and navigable framework of legislation “within the context of existing policy settings”. The ultimate goal is to achieve meaningful compliance with the substance and intent of the law.
In terms of timing these are the parameters:
- A first interim report focusing on the appropriate use of definitions in corporations and financial services legislation is due by 30 November 2021;
- A second interim report focusing on regulatory design and the hierarchy of primary law provisions, regulations, class orders, and standards, is due by 30 September 2022;
- A third interim report focusing on potential reframing or restructuring of Chapter 7 of the Corporations Act is due by 25 August 2023;
- A consolidated final report is due by 30 November 2023.
The FSC will be establishing a Working Group in due course to address the matters to be considered by the inquiry.
It is useful to note that the ALRC’s work is intended to complement the ongoing work of Treasury in seeking to simplify relevant legislation. Presumably, there also will be interaction with the recently announced Deregulation Taskforce.
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COVID-19 and the Electronic Witnessing of Documents in New South Wales (NSW)
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Legislation is to be introduced into the NSW Parliament to extend the arrangements introduced during the COVID-19 pandemic for the witnessing of significant legal documents such as Wills, powers of attorney and statutory declarations by Audio Visual Link (AVL). The legislation will enable the remote witnessing of documents by AVL to continue until the end of 2021.
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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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