Welcome to Issue 43 of the FSC Policy Update – a fortnightly member briefing on the main legislative and regulatory changes across the financial services industry.
The Government announced significant reforms to superannuation in the Federal Budget, including the implementation of the Royal Commission’s ‘one default account’ recommendation, a policy priority of the FSC’s, along with new APRA powers and controls on the use of members’ retirement savings.
Labor’s spokesperson for superannuation, Stephen Jones MP, has issued a word of caution in relation to the reforms, indicating the reforms may face an uphill battle through Parliament.
This issue also covers other important issues, including an update of the Design and Distribution Obligations and consultation on the work of the Actuaries Institute’s Disability Income Task Force.
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Blake Briggs, FSC Deputy CEO
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Click on the topic of interest below to read more
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YOU’RE INVITED: FSC Future of Advice Summit & Report Launch Event
COVID-19 relief extended until April 2021
ASIC issues no action position for financial advisers in Victoria
Consultation the Financial Planners and Advisers Code of Ethics 2019 Guidance
FASEA will run six adviser exams in 2021
Design and Distribution Obligations (DDO) update
Superannuation Budget announcements
Updated APRA FAQ – JobKeeper and Work Test
In Conversation: Senator Deborah O'Neill – Wednesday 14 October
Final APRA Individual Disability Income Insurance (IDII) Sustainability Measures
Actuaries Institute Public Consultation
Life Insurance Industry Awards 2020
ASIC Project focusing on Responsible Entity Governance
ESG Working Group: Modern Slavery Guidance
New Guidance Note – Improving Gender Balance in Investment Management Teams (GN 38)
Remote witnessing pilot scheme in New South Wales
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ADVICE
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YOU’RE INVITED: FSC Future of Advice Summit & Report Launch Event
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The FSC is soon to launch Rice Warner’s Future of Advice report to begin a conversation on building a simpler and less costly advice system. The report will be launched at the Future of Advice Summit on the morning of Tuesday 20 October, partnered by PwC, in an interactive webinar-styled event being opened by Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator the Hon Jane Hume. The Summit will bring together leading voices from across industry, government, regulators and academia to talk about reducing unnecessary cost and duplication holding back advice businesses and consumers - and steps to take to achieve that.
Hear a message to the industry from speaker Glen James of My Millennial Money here. Or read a blog here from speaker Nathan Jacobsen from Paragem.
Delegate participation will shape the Green Paper on Financial Advice that the FSC will launch next year setting out the policy vision for tomorrow’s financial advice industry.
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COVID-19 relief extended until April 2021
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ASIC has extended COVID-19 relief announced in June to expire in April 2021. The relief was originally scheduled to expire in October 2020. Specifically, the repeal of ASIC Corporations (COVID-19 – Advice-related Relief) Instrument 2020/355 - which creates the relief - has now been extended. ASIC is empowered to extend the relief for up to six months.
This Legislative Instrument (LI) was enacted in June and provides temporary relief to:
- allow financial advisers not to give a Statement of Advice (SOA) to a client when providing advice about the early release scheme, subject to several conditions;
- permit registered tax agents to give advice about the early release of superannuation to their existing clients without needing to hold an Australian Financial Services (AFS) licence, subject to several conditions;
- give advice providers up to 30 business days (instead of 5 business days) to give a SOA after time-critical advice is provided; and
- enable a Record of Advice (ROA) to be given instead of an SOA, in certain defined circumstances to existing clients of financial advisers.
A full copy of ASIC’s announcement is available here.
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ASIC issues no action position for financial advisers in Victoria
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ASIC has issued a no action position regarding the Fee Disclosure Statement (FDS) and Opt In provisions within the Corporations Act. This step will assist advice businesses and advisers to ensure their operations are not unduly halted or inhibited given the impact that Stage 4 restrictions in Victoria currently have on their businesses when meeting their compliance obligations. The FSC has worked with the Financial Planning Association of Australia (FPA) and Association of Financial Advisers (AFA) to achieve this outcome.
ASIC has updated its COVID-19 financial advice relief FAQ here.
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Consultation on the Financial Planners and Advisers Code of Ethics 2019 Guidance
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FASEA is consulting on the Draft Financial Planners and Advisers Code of Ethics 2019 Guide (access via here). The Adviser Competency Working Group will develop the FSC’s submission. A final submission will be circulated to the Working Group and Advice Board Committee for comment by 2 November which is the deadline for submissions.
The draft guide explains the intent and application of the values and standards set out in the Code of Ethics (“the Code”). It uses fundamental questions to help illustrate the Code and highlights the requirement for advisers to exercise their professional judgement in the best interests of their client guided by the values and standards of the Code.
The draft guide builds on the Preliminary Response to Submissions released in December 2019 and the case study examples contained in FG002 Financial Planners & Advisers Code of Ethics 2019 Guidance – both of which the FSC had inputted into.
The Draft Guidance is available here.
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FASEA will run six adviser exams in 2021
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FASEA has confirmed, 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.
Existing advisers have until 31 December 2021 to pass the exam. Advisers who are unsuccessful at an exam sitting may sit future exams. The exam tests practical knowledge across three domain areas relevant to an adviser’s day to day practice being:
- financial advice regulatory and legal obligations;
- applied ethical and professional reasoning and communication; and
- financial advice construction.
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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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PARLIAMENT, LEGISLATION AND REGULATION
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The 2020 Federal Budget was handed down on 6 October.
Special analysis was sent to members on the evening, providing a high-level summary of the Budget and economic forecasts, and outlining the significant policy proposals contained in the Budget.
To learn more about the Budget outcomes from the FSC team, see here;
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Design and Distribution Obligations (DDO) update
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FSC members continued to develop template Target Market Determinations (TMDs) for platforms/wraps, super master trusts, and managed funds. The FSC provided the draft template TMDs for life insurance to financial planners for comment (including the advice licensees networks in the FSC membership).
The DDO technology solutions working group is developing a proposal for a messaging solution that will securely convey the information flows between product issuers and distributors as required by the DDO regime. The proposal will be brought to the FSC Board Committees for consideration in the near future.
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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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SUPERANNUATION
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Superannuation Budget announcements
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Significant changes to superannuation were announced in the Budget last week, including:
- implementation of the Royal Commission’s ‘stapling’ recommendation, where an employee takes with them their account from job to job (unless the employee nominates another fund);
- introducing an ATO administered comparison tool to help individuals choose a fund;
- an annual performance test administered by APRA, with funds failing the test for two consecutive years unable to receive new members until their performance improves; and
- regulation to ensure funds only spend members’ savings on activities that are in their best financial interests to maximise their retirement benefit.
Additional information on these changes can be found in the Your Future, Your Super policy document released by Treasury. It is expected that more information on the changes will be available soon, and draft legislation is likely to be released shortly for consultation.
The FSC will keep members informed of further developments and will ensure an appropriate framework for member consultation is in place.
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Updated APRA FAQ – JobKeeper and Work Test
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APRA has updated its COVID-19 FAQ for superannuation funds to include information on the interaction between JobKeeper and the Work Test for individuals aged 67-74. This clarifies that where an employer is receiving JokKeeper payment for an individual, that individual can be considered “gainfully employed” even if they have been stood down.
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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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In Conversation: Senator Deborah O'Neill – Wednesday 14 October
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Wednesday morning's event will see the Deputy Chair of the Parliamentary Joint Committee on Corporations and Financial Services (PJC), Senator O'Neill discuss all things life insurance with host Nick Kirwan, Senior Policy Manager, Life Insurance.
The Senator will discuss her experiences throughout her time on the PJC and the impacts it has had on the industry, and comment on life insurance matters arising from the Federal Budget on 6 October.
Click here for more information, including for registration details.
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Final APRA Individual Disability Income Insurance (IDII) Sustainability Measures
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APRA has issued a letter to all life insurers and friendly societies setting out its finalised position on the sustainability measures for Individual Disability Income Insurance (IDII). Life companies have been given until 1 October 2021 to design and start offering new IDII policies that are consistent with these measures. The release of these final measures follows APRA’s December 19 letter setting out its initial position and seeking feedback from industry on a number of elements of the measures.
Read the full letter on the APRA website by clicking here. The FSC has also issued a media release following APRA’s announcement.
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Actuaries Institute Public Consultation
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The Actuaries Institute Disability Income Task Force has released for public consultation a set of documents encompassing a number of recommendations to help address the sustainability challenges faced by the life insurance industry. The deadline for stakeholder feedback has been set as 31 October 2020.
Read the cover letter produced by the Actuaries Institute on this consultation by clicking here. The FSC has also issued a media release in support of the work of the Actuaries Institute.
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Please contact Aidan Nguyen for more information on how life insurance members can get involved.
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The Life Code Compliance Committee (LCCC) – the independent Committee which monitors and enforces industry compliance with the Life Insurance Code of Practice – recently released its Annual Report for 2019–20. Read the full media release from the LCCC 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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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 will be granted). The FSC encourages all eligible organisations and individuals to participate.
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TAX
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- The ATO provided the FSC with draft ATO guidance on the tax treatment of remediation. The FSC held a member meeting, provided a submission to the ATO on the draft materials, and then met with the ATO to discuss the submission.
- The ATO is proposing that financial service businesses should report on interest paid to consumers as part of remediation, but the FSC noted that in many cases the ATO had no legal power to require this reporting and businesses could not voluntarily report this information to the ATO for privacy reasons.
- The final submission, and notes on the meeting with the ATO, has been distributed to interested members and the FSC remediation working group.
- In follow up to Budget announcements, the FSC will be discussing with the Government (and other interested parties) the details of announced measures including:
- The proposed reforms to corporate tax residency – the FSC will request that the reforms also apply to managed funds
- The commitment to ‘modernise and expand’ Australia’s Double Tax Agreement (DTA) network.
- The Budget proposal for full tax expensing (or instant asset write off) and tax loss carryback will only apply to businesses with aggregated turnover below $5 billion, excluding smaller Australian businesses that are subsidiaries of larger global companies.
- The potential for property funds to be excluded from full expensing as they may not strictly be ‘in business’.
- The FSC provided a response to the ATO on various issues raised by the ATO’s detailed information requests that have been sent to major fund managers. The FSC’s response indicated the difficulties that many fund managers would have in complying with the ATO’s information requests.
- The ATO published an article on the tax treatment of the rollover of death benefits. The FSC provided detailed comments on an early draft of this article. The article should address most of the issues superannuation funds have about how to apply recent legislative changes to the rollover of death benefits.
- The FSC provided a written response to a Parliamentary Inquiry arguing that a Double Tax Agreement (DTA) with Luxembourg would provide substantial benefits to investors into Australia’s managed funds, removing double or over taxation, while potentially reducing cross-border tax avoidance.
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GST update
- The ATO has provided the FSC with some questions responding to the concerns the FSC has raised about the GST treatment of the fee cap under Protecting Your Super. The questions are being provided to the GST expert group for consideration.
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Insurance duty
- The Queensland Government responded to the FSC’s request for changes to insurance duty rules relating to the concessions life insurers provided to customers as a result of COVID-19. The response has been provided to the Insurance Duty Expert Group for consideration.
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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 Project focusing on Responsible Entity Governance
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ASIC has commenced a project on Responsible Entity (RE) Governance and has selected 10 RE’s with different business models to participate in the review. It is envisaged that the outcome of the review will result in ASIC issuing a report with their observations and findings in the middle of next year. Areas of focus include:
- Board characteristics such as independence and tenure;
- Governance processes of the Board;
- Compliance Committees;
- Outsourcing of service providers and related governance.
The FSC has established a new working group (RE Governance Working Group) to focus on this issue further and will be convening shortly.
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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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ESG Working Group: Modern Slavery Guidance
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Members of the ESG Working Group are currently working toward creating FSC guidance that will assist members with assessing and reporting modern slavery risks within their portfolios, as well as assisting members in engaging with external clients. It is envisaged that the guidance note will include tips for embedding modern slavery in internal processes, best practice risk rating methodologies, guidance on commonly asked questions from external clients and guidance on reporting different asset classes.
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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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New Guidance Note – Improving Gender Balance in Investment Management Teams (GN 38)
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Launched at an event on Monday to huge success, this new Guidance Note is designed to assist Investment Management members to improve the representation of women in investment management teams over time. Learn more from the FSC's Bianca Richardson here. And download the Guidance Note here.
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The inaugural Summit on the mornings of Monday 9 & Tuesday 10 November will include a number of keynotes and panel discussions with a cross-section of experts – both locally and internationally – discussing investment-focused issues.
The event, partnered by APIR, will deliver delegates discussions on regulation, superannuation, ESG investing, as well as the future of work, the Summit will cover a broad range of technical and industry-relevant topics that will highlight opportunities and challenges for the funds management sector.
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EVENT DETAILS
Date: Monday 9 & Tuesday 10 November
Time: 9.00am - 11.45am each day
Member Rate: $200 + GST per person
Non-Member Rate: $275 + GST per person
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LEGAL
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Extension of temporary measures for electronic meetings and electronic signing and witnessing of documents
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On 21 September 2020, the Treasurer made the Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (Cth) (the Determination). The Determination repeals and replaces the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (Cth) which allows for meetings to be held electronically and the use of electronic signatures in the execution of documents under section 127 of the Corporations Act. The Determination extends those temporary measures until 22 March 2021.
The text of the Determination may be found here.
Unfortunately, the execution of Deeds under these measures remains unclear. The common law rule is that a Deed must be executed on vellum, parchment or paper. The prudent view is that because of the absence of clear wording overturning that rule, reliance on the Determination in the case of execution of Deeds should be as a matter of last resort only.
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Remote witnessing pilot scheme in New South Wales
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In April, the New South Wales Parliament, introduced temporary modifications to the Electronic Transactions Regulations 2017 (NSW). These modifications permitted signatures on certain documents (including deeds, affidavits and statutory declarations) to be witnessed via audio visual link. These temporary measures were scheduled to terminate on 26 September 2020. However, these recently have been extended by a further 6 months.
In a further initiative, Parliament has legislated for a pilot scheme under the Stronger Communities Legislation Amendment (Courts and Civil) Act 2020 (NSW) that will continue until the end of 2021. The scheme preserves the existing remote witnessing arrangements and transfers them to the Electronic Transactions Act 2000 (NSW). The intention appears to be to allow sufficient time to assess the effectiveness of the scheme and consider whether longer term and more permanent reform is required. See the Explanatory Note here.
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Product Disclosure Statements (PDS) fee and cost disclosure Instrument for superannuation products: Minor Amendment
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A minor amendment has been made to the RG 97 fee and cost disclosure regime.
The ASIC Corporations (Amendment) Instrument 2020/853 (Instrument), which commenced on 23 September 2020, amends the ASIC Corporations (Disclosure of Fees and Costs) Instrument 2019/1070. The purpose of the amendment is to clarify the intended operation of the fees and costs disclosure regime PDSs applicable to superannuation products.
The underscored words are now included in the "Administration fees and costs" line item of the Example of annual fees and costs:
For every $50,000 you have in the superannuation product, you will be charged or have deducted from your investment $[ ] in administration fees and costs, plus $[ ] regardless of your balance.
It should be noted that the added wording is not mandatory and will apply only where the issuer has that type of fee structure.
The Explanatory Statement and the Instrument may be found here and here respectively.
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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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