Welcome to Issue 45 of the FSC Policy Update – a fortnightly member briefing on the main legislative and regulatory changes across the financial services industry.
Parliament resumed for a short, one week sitting on Monday 9 November, the second last sitting period of the year. The FSC continues to expect a suite of Royal Commission (RC) bills to be introduced to Parliament before the end of the calendar year, as previously indicated by the Government, but for many of these bills to also be referred to a committee process for further examination.
The FSC is concerned about the 1 January 2021 commencement dates of most of the RC recommendations in this tranche. Impossibly tight implementation timeframes are not achievable, especially with the final form of the legislation unknown. The FSC is continuing to liaise with the Government and will provide updates to members as they come to hand.
Draft legislation to implement the recently announced ‘Your Future, Your Super’ reforms is also expected to be released imminently. The FSC has taken a proactive approach to engage with the Government on the details of the package. Whilst supportive of the aim to improve consumer protections, we are working closely with members to highlight concerns around the proposed assessment methodology for identifying poorly performing funds.
This Update covers other important issues, including next steps on our financial advice advocacy, the Women in Investment Management Charter and a Life Code update.
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) update
Superannuation Ecosystem Cybersecurity Survey
Future of Advice Infocus: Life Insurance Briefing – Thursday 12 November
Upcoming ASIC life insurance claims handling project
Your views on financial advice are needed
ESG Working Group – Modern Slavery Guidance Note
Diversity Working Group – Women in Investment Management Charter
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PARLIAMENT, LEGISLATION AND REGULATION
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Design and Distribution Obligations (DDO) update
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The FSC has contacted several potential vendors of an industry technology solution for the messaging that is required by the DDO regime. The FSC has sought initial views from these potential vendors about the options for developing this solution. The technology solutions working group is also developing a more detailed Request for Proposal that is also being taken to the FSC Board Committees and Board for consideration.
The main DDO working group has met and considered the difficulties industry is facing due to the delay in the release of ASIC’s final Regulatory Guidance (RG) on the DDO regime. The FSC will be communicate these concerns to ASIC shortly, including querying the extent to which FSC members can rely on the draft RG in the absence of the final RG.
The meeting also discussed the next steps for FSC work program on the DDO, and considered that work on industry-wide guidance on the meaning of ‘reasonable steps’ and ‘significant dealing’ would be worthwhile, potentially including examples. Further work on an industry protocol will also be considered.
The FSC is meeting with a number of other industry associations and participants to discuss the FSC’s work, and whether other industry participants would be interested in licensing the FSC’s guidance on Target Market Determinations, or participate in the FSC’s proposed industry technology solution.
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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 Ecosystem Cybersecurity Survey
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The Gateway Network Governance Body (GNGB) is working with PwC Australia to conduct this survey and develop a cybersecurity research report with the findings and recommended action plans for the industry. Participant feedback combined with broader industry research, will be compiled into the report, to be shared in early 2021.
Everyone in the superannuation industry, or those providing services to the superannuation industry is invited to complete the survey (including multiple respondents from the same organisation). The survey takes approx. 10 minutes and is available until 25 November.
Two survey respondents will be chosen at random and be given the opportunity to nominate a charity of their choice to receive a $100 donation in their name.
Click HERE to participate.
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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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Following a detailed review process, the FSC has released its response to consultation on the second version of the Life Insurance Code of Practice. As a result of this review process, the FSC will make a number of additional changes which build upon those previously introduced in the consultation draft of Code 2, such as:
- Increased support for vulnerable customers including those with mental health conditions and those experiencing family violence;
- Providing more protections for claimants such as new obligations on the use of interviews, surveillance and medical examinations; and
- Giving the Code more “teeth” by giving the Life Code Compliance Committee new powers to enforce the Code and impose sanctions.
A copy of the response can be found here. And see the media release here.
The Life Code Compliance Committee has finalised and released Guidance Note 4 – Section 6.5 (Financial Hardship). The guidance note outlines the expectations of subscribers where a customer may have trouble meeting their premium payments. A copy of the guidance note 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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Future of Advice Infocus: Life Insurance Briefing – Thursday 12 November
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Financial advice: what will radical changes to the industry’s largest distribution model mean for life insurance?
Be part of an in-depth briefing for our life insurance members, hosted by the FSC’s Zach Castles, Policy Manager (Advice) and Michael Rice and Richard Dunn of Rice Warner, on the recently released Future of Financial Advice report. This interactive session is a great opportunity to participate in a focused discussion on how the advice debate relates to life insurance.
Changing market needs means the way advice is delivered must be reformed to ensure it is affordable and accessible. But how must this be considered with a new generation of income protection products currently on train for next year? Expect the discussion to delve deep into some of the implications for product design and distribution.
Date: Thursday 12 November
Time: 9.30am - 10.30am
Register and find out more here.
Please contact Ieesha Maybury-Picatoste for more information.
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Upcoming ASIC life insurance claims handling project
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ASIC will be commencing its life insurance claims handling project shortly across two phases. Phase 1 is a holistic review of insurer’s claims teams and will examine areas such as the insurer’s claims handling philosophy and the insurer’s approach to supporting their claims team. Phase 2 is a targeted review on the insurer’s use of physical surveillance and how insurer’s approach non-disclosure scenarios.
As part of this project, ASIC also intend to issue two data requests relating to Retail IP claims, split between 1H 2021 and 1H 2022. The FSC understands the data specification will incorporate ASIC’s expectations on the data that insurers should be collecting.
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Please contact Aidan Nguyen for more information.
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ADVICE
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Your views on financial advice are needed
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The FSC is leading a new policy debate on financial advice and is framing up its processes for internally consulting members on the development of its Green Paper of policy asks it will release next year. This will be informed by Rice Warner’s Future of Advice report released last month. We would welcome any feedback you have on the report and financial advice regulation more broadly.
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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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TECHNOLOGY
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The Final Report of the Senate Select Committee on Financial Technology and Regulatory Technology’s inquiry, chaired by Senator Andrew Bragg, will be handed down on 16 April 2021. Submissions on the Final Report are expected to open soon.
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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 met with Treasury to discuss a number of tax issues relevant to fund managers. Issues discussed included:
- the proposed reforms to tax residency – FSC indicated we wished the reforms to extend to trusts and corporate limited partnerships. FSC also raised issues with the interaction of residency with the Investment Manager Regime (IMR) which has unaddressed issues.
- The proposed review of Double Tax Treaties, and the existing issues FSC members have in obtaining treaty benefits from countries including France, Switzerland, China, Taiwan and Denmark.
- Other issues including the issues with foreign capital gains and Foreign Income Tax Offset (FITO) after the Burton decision, the LIBOR transition, the Offshore Banking Unit regime, the proposed removal of the CGT discount at fund level, and the stalled development of the Corporate Collective Investment Vehicles (CCIVs).
- More detailed update has been provided to the FSC Tax Experts.
- The FSC Tax Experts Group will be meeting with the custodians’ tax committee to discuss issues of common interest including difficulties in obtaining tax treaty benefits from Switzerland; the custodians’ views on how to deal with foreign capital gains and FITOs; and the ATO’s views on the ability for fund managers to rely on third party data. The meeting is scheduled for Friday 13 November.
- The United Kingdom (UK) Government has announced it is proposing to provide an exemption from CGT for foreign fund managers that have portfolio (below 10%) holdings in UK property. This is a welcome development, and the FSC has indicated it will co-sign a letter with other fund management associations supporting the change.
- The Tax Experts are considering the tax implications of the potential move to negative interest rates.
- The FSC has encouraged the ATO to finalise its views on the issues with foreign capital gains and FITOs after the Burton decision, and has requested an additional meeting with FSC members to discuss this and other issues.
- The FSC sought ATO views on some public information about the tax deductibility of income protection insurance. This response was shared with the Life Tax Experts group.
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GST
- A meeting of the FSC GST expert group has been scheduled for Tuesday 24 November. The meeting will cover issues including the GST treatment of remediation, the fee cap under Protecting Your Super (PYS), the ending of grandfathered remuneration, and RG 97.
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Insurance duty
- The insurance duty expert group is developing responses to Queensland and Victorian Offices of State Revenue in relation to their proposed treatment of COVID-19 hardship measures implemented by life insurers.
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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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ESG Working Group – Modern Slavery Guidance Note
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The ESG Working Group continues to work on a draft guidance note which will help members with modern slavery risk reporting and risk management in light of NSW and Commonwealth modern slavery legislation. It is envisaged that a draft will be ready for comment by the Investment Expert Group in early 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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Diversity Working Group – Women in Investment Management Charter
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Continuing on with the work on Guidance Note 38 – Improving Gender Balance in Investment Management Teams (GN 38), the Diversity Working Group has been progressing work on developing a framework for adopting a flexible gender balance target in investment management teams – the Women in Investment Management Charter (WIM Charter). The framework being developed is based on HM Treasury Women in Finance Charter which has been in operation in the United Kingdom (UK) since 2018 and, which has a broader focus and, is aimed at increase gender balance in financial services in the UK. It is envisaged that the WIM Charter will be incorporated into GN 38 as a new section in the Guidance Note. Adoption of any of the aspects of the Guidance Note will be voluntary, as per usual practice. A further update will be provided as this piece of work is finalised.
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