Welcome to Issue 64 of the FSC Policy Update.
With the 47th Parliament of Australia set to sit for the first time in the coming weeks the FSC has been proactive in advocacy and media engagements to ensure the best interests of our members and Australian consumers.
The FSC has welcomed the decision to pause the extension of the Your Future, Your Super (YFYS) performance test beyond MySuper products for 12 months, and to review the YFYS laws. We have also welcomed the Government’s commitment not to unwind the stapling measures of the YFYS laws.
Recently, the FSC released its submission to the Quality of Advice Review. The submission makes clear that financial advice remains out of reach for a significant number of consumers due to a complex and costly regulatory framework that is no longer fit for purpose in delivering affordable, accessible and ultimately simpler advice.
Finally, I am pleased to advise that on 3 August, APRA Member responsible for superannuation, Margaret Cole, will join FSC CEO, Blake Briggs, for an exclusive to member event. More details can be found here
Spiro Premetis, Executive Director of Policy and Advocacy
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Click on the topic of interest below to read more
Design and Distribution Obligations
ASIC publishes new Information Sheet, Instrument and Regulatory Guides on CCIVs
Government reviews Your Future, Your Super laws and pauses expansion of the performance test
Update on Choice Product Dashboards
ASIC releases guidance for superannuation calculators and retirement estimates
APRA extends reporting timeframe for non-TDP data for 30 June
Preparing a New FSC Standard on Claims Handling in Super
Diversity Working Group Guest Speakers – Camilla Love, F3, and Yolanda Beattie Future IM/Pact
Sustainability Taxonomies - ASFI Sustainable Finance Taxonomy
Sustainability Disclosure Standards – International Sustainability Standards Board
Quality of Advice Review submission released
Advice sector now united on reforms to reduce the cost of advice
Life Insurance Framework Evaluation
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PARLIAMENT, LEGISLATION AND REGULATION
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Design and Distribution Obligations
The FSC continues to work on DDO implementation issues, including:
- The FSC has responded to a targeted consultation initiated by ASIC in June on whether to grant a DDO exemption for the reissuing of life insurance policies. The FSC has been working with members on preparing a detailed response to a series of questions from ASIC on the scope of the proposed relief. The response addresses the key benefits that an exemption would bring to consumers, noting that the reissue of life insurance policies at the request of consumers is likely to grow over time. In addition, the FSC has proposed two mark-ups of a draft legislative instrument circulated by ASIC in conjunction with the targeted consultation questions
- The FSC is progressing work with members on reviewing and updating the TMD template for funds management prepared by the FSC. The initial work on the revisions is nearing completion and once this is completed the FSC will look at updating the other TMDs
- The FSC standard questions for distributor DDO due diligence questionnaire (DDQ) were finalised in April and are now available on the FSC website. This document is intended to assist issuers of financial products to conduct due diligence in the selection of distributors.
Please contact Michael Potter or Ashley Davies for more information.
ASIC publishes new Information Sheet, Instrument and Regulatory Guides on CCIVs
Following meetings between ASIC and the FSC in mid-May to discuss the industry feedback ASIC had received on CP 360 (the consultation paper released by ASIC in March setting out ASIC’s proposed approach on the introduction of the new Corporate Collective Investment Vehicle (CCIV) regime scheduled for 1 July 2022), ASIC has since published its formal response and a suite of new documentation to address “day one” issues associated with the new CCIV regime.
ASIC has released Report 728: Response to submissions on CP 360 Corporate collective investment vehicles: Preparing for the commencement of the new regime (REP 728) highlighting the key issues from, and ASIC’s response to, submissions to ASIC’s consultation on the new regime’s licensing (see CP 360). ASIC also has released Information Sheet 272 How to register a corporate collective investment vehicle and sub-fund (INFO 272). INFO 272 provides guidance on:
- CCIV and initial sub-fund registration requirements
- The application process, including how ASIC will assess applications for CCIVs and initial sub-funds
- CCIV Constitution and compliance plan requirements
- The application process for registering further sub-funds.
A list of amended and updated regulatory guides on the CCIV are available from this website
Finally, we note that the ASIC Corporations (Financial Requirements for Corporate Directors of Retail Corporate Collective Investment Vehicles) Instrument 2022/449 was released at the end of June, putting in place the financial requirements that are elaborated on in more detail in RG 166.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. or Ashley Davies for more information.
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SUPERANNUATION
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Government reviews Your Future, Your Super laws and pauses expansion of the performance test
The Government has announced a pause on the extension of the performance test beyond MySuper products for 12 months to provide time for a broader review into the Your Future, Your Super (YFYS) laws.
The review will consider whether performance test has had any significant unintended consequences for MySuper products, assess how the test should be applied to other superannuation products and the regulatory complexity of the best financial interests duty requirements. Notably, the review will not consider the ‘stapling’ requirement, a measure which we have advocated strongly for.
Separate to the review of the YFYS laws, the Government also announced it will soon consult on:
- Exposure Draft legislation to adjust the performance test for faith-based products
- Exposure Draft regulations for amendments to the annual members’ meetings disclosure requirements.
A copy of the Government’s media release can be found here. A copy of the FSC response to this announcement can be found here.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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Update on Choice Product Dashboards
ASIC has decided to remake and extend existing relief for choice product dashboard disclosure requirements until October 2027. ASIC notes in its Media Release that its decision to remake relief is because, as CP 358 states, these requirements cannot apply without regulations and the regulations have not been made. Separately, the FSC notes public comments made by the Hon. Stephen Jones to consult on expanding the current product dashboard requirements for MySuper products to all Choice products.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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ASIC releases findings of its review on superannuation trustee communications for the YFYS performance test
ASIC has released findings from its review of superannuation trustees’ communications with their members in relation to last year’s Your Future Your Super performance test for MySuper products (see link: REP 729).
The report covers three main areas: (1) General communications to members – including with respect to misleading or deceptive representations and the specific content of communications (with 6 specific examples provided; (2) Compliance with mandatory disclosure obligations – specifically notice to members and website disclosures; and (3) Managing communications – covering communications plans, and other issues such as a need for consistency across communications and communications by third parties.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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ASIC releases guidance for superannuation calculators and retirement estimates
ASIC has released Regulatory Guide 276 Superannuation forecasts: Calculators and retirement estimates (RG 276) and a new legislative instrument updating the relief which facilitates the provision of superannuation calculators and retirement estimates.
The new relief for superannuation calculators and retirement estimates is set out in ASIC (Superannuation Calculators and Retirement Estimates) Instrument 2022/603. This instrument took effect on 1 July 2022. ASIC has provided a transition period of six months, during which providers of superannuation forecasts may rely upon either the existing relief or the new relief. Only the new relief will be available from 1 January 2023.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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APRA extends reporting timeframe for non-TDP data for 30 June
Following feedback from industry, APRA has written to RSE Licensees to confirm that they will provide a 3-month extension to the due date for certain non-TDP data for the period ending 30 June 2022 from 28 July 2022 to 28 October 2022.
APRA has also updated its FAQ earlier today to support this change. The FAQs are available on the APRA website at: Frequently Asked Questions - Superannuation Data Transformation
In the updated FAQ, APRA also noted that timeframes for Phase 2 of the Superannuation Data Transformation would be revised in light of feedback with industry. Its response twill be released in early August and contain the details of the timing and sequencing of the Phase 2 topic areas.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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Preparing a New FSC Standard on Claims Handling in Super
Following further feedback from FSC members, the FSC is preparing a revised draft of an FSC Standard to replace Guidance Note 42 on Claims Handling in Super. While complying with an FSC guidance note is recommended complying with a relevant FSC Standard is mandatory as a minimum Standard and the new Standard will provide further clarity for trustees and respond to concerns of consumer groups. This Standard will avoid duplicating or repeating any relevant legislation while being aligned with and complementing the recently published revised Life Insurance Code of Practice.
Please contact Ashley Davies for more information.
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INVESTMENTS
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As part of the continued focus on improving gender diversity in asset management teams, the FSC has released the second Diversity Survey to fund manager members. It has been positive to receive a number of survey responses already and we encourage more fund manager members to participate in the second edition of this survey.
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 Guest Speakers – Camilla Love, F3, and Yolanda Beattie Future IM/Pact.
On Monday 27th of June and Monday 4th of July, the Diversity Working Group met with Camilla Love and Yolanda Beattie who respectively spoke about F3 and Future IM/Pact, which are two great initiatives encouraging more females to choose financial services and funds management as a career path. F3 targets both high school and university students encouraging them to choose a career in financial services, including funds management, whilst Future IM/Pact is focused on university and those early in their career and aimed at attracting more diverse talent into front-office investment teams. These initiatives provide learning and work experience opportunities for young women and connect with industry partners and organisations to take on work experience students and interns.
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Inspiring the next generation of women to work in funds management – getting involved with F3 and Future IM/Pact
Increasing gender balance in investment management teams and in the industry more broadly, requires more women to choose funds management as a career path. Increasing awareness of, and inspiring women to choose, funds management as a profession is a key part of increasing the number of female candidates applying for a role.
If your organisation is interested in taking on a working experience student (What We Do — F3 - Future Females in Finance (fthree.com.au), or taking interns (Programmes and Events (future-impact.com.au)) please click on the respective F3 or Future IM/Pact links for more information. Note Future IM/Pact focuses on attracting more diverse talent into front-office investment teams, whilst F3 encourages young women to choose a career in financial services, including funds management.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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Sustainability Taxonomies - ASFI Sustainable Finance Taxonomy
The Australian Sustainable Finance Institute has commenced work on developing an Australian sustainable finance taxonomy. This work will draw on existing taxonomies such as the EU Taxonomy and ASEAN Taxonomy. As part of this, the FSC is involved in the ASFI Sustainable Finance Taxonomy Technical Advisory Group, which includes representatives from the Council of Financial Regulators and other financial services peak bodies. The next meeting of the advisory group will be on Wednesday 27 July.
Along with involvement in ASFI’s work, the FSC’s ESG Working Group is developing the FSC’s policy position on a sustainable finance taxonomy that is suitable for the Australian context.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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Sustainability Disclosure Standards – International Sustainability Standards Board
The International Sustainability Standards Board (ISSB) is consulting on draft global sustainability and climate related disclosures. ASIC has stated its public support of this process and has encouraged Australian stakeholders to participate in the consultation to help establish these standards as a ‘global baseline’. ASIC Deputy Chair Karen Chester stated, ‘Should the Exposure Drafts be adopted internationally, they will inevitably impact Australia’s capital markets and participants, as investors continue to demand comparable sustainability and climate-related corporate disclosures.’ The FSC is supporting a joint submission to the draft standards with several Australian industry peak bodies.
Along with considering the joint industry submission to the ISSB standards, the FSC’s ESG Working Group will be considering the FSC’s policy position on the shape of an Australian climate risk disclosure regime. The introduction of a mandatory regime was an election commitment of the new Federal Government.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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ADVICE
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Quality of Advice Review submission released
Last week the FSC released its submission to the Quality of Advice Review. The submission makes clear that financial advice remains out of reach for a significant number of consumers due to a complex and costly regulatory framework that is no longer fit for purpose in delivering affordable, accessible and ultimately simpler advice.
It proposes a personal advice framework placing the delivery of limited-type, by digital or traditional means at the centre of the regulatory framework, to enable consumers to get advice on the issues they want, when they want it, by digital or other means, to be achieved through three key changes:
- The abolition of the safe harbour steps for complying with the Best Interests Duty and amending the Code of Ethics to reflect this change
- The introduction of a technology-neutral Letter of Advice with simplified requirements supported by scalable advice obligations
- Redefining advice with a personal advice-general information framework in a manner agnostic of financial product that is consulted on with industry before implementation.
The framework characterised by the three above reforms, acknowledges that all advice is personal, but is capable of being scaled up or down in terms of disclosure, and guided by the scope of the advice balanced with the professional judgement of the and the needs of the consumer. All advice would be termed, and recognised, as ‘personal advice’ aligned with the consumer perspective (eg. Intra fund advice, limited advice, digital advice would all be regarded as personal advice).
The FSC’s submission also advocates:
- The retention of the AFSL and the introduction of a practicing certificate for financial advisers administered by a central body
- No exemption to the personal advice framework for the accounting profession
- Removal of personal advice from the Design and Distribution Obligations (DDO)
- A system of principles-based requirements, and industry-led compliance to characterise annual renewal and the interactions between trustees, advisers, platforms in honouring fee consent obligations to consumers
- Redevelopment of regulatory guidance that is more exemplary and providing the Regulator greater capacity to engage industry on compliance such as an expansion of the fintech regulatory sandbox
- Redefining the thresholds for wholesale investors and in-building a method by which a financial adviser can ascertain the suitability of a consumer for distinction as a wholesale consumer
- The retention of the ban on conflicted remuneration and exemptions for non Life Insurance Products
- The retention of the Life Insurance Framework (LIF) and measures to address underinsurance levels.
A copy of the submission is available here.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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Advice sector now united on reforms to reduce the cost of advice
There is broad consensus across the industry on the themes around cost reduction that need to be emphasised in the Review. The FSC participated in a joint submission to the Quality of Advice Review along with 11 other associations which specifically
- Review the advice process through the lens of the consumer and simplify consumer facing advice
- Removal of the safe harbour steps, clarity around how the Best Interests Duty is met
- Review key terms of advice (personal advice and general advice) aligned with consumer understanding
- Support for principles-based regulation
- Clarify obligations of the licensee and individual accountability of the financial advisers to remove duplication and maintain appropriate consumer protection
- Increased recognition and responsibility of the financial adviser in the advice process
- Stronger and more holistic engagement model from ASIC
- Proposed measures to improve access to data and improve financial literacy.
A copy of the Joint Association Working Group’s submission is available here.
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
The FSC has been pleased with the positive reception and media coverage related to the publishing and launch of the new Life Code last month. The Life Code Compliance Committee issued a very positive media release which can be found here. In it they state, “The new code includes a range of additional consumer protections as well as increased powers for the Life Code Compliance Committee (Life CCC) to impose sanctions for breaches.” While the Public Interest Advocacy Centre (PIAC), one of the harshest critics of the life insurance industry, has acknowledged the new consumer protections.
Please contact Nick Kirwan for more information.
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Mental Health Update
The FSC has been engaging with the National Mental Health Commission which is currently preparing a report called the National Stigma & Discrimination Reduction Strategy Report for the Health Minister.
Following productive engagement with the FSC, the report publication date has been pushed back by a month for the Commission to ensure an accurate picture of the life insurance industry is presented. The National Mental Health Commission have confirmed they will engage with the FSC again before the report is published.
Please contact Nick Kirwan or Matthew Hawkes for further details.
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Life Insurance Framework Evaluation
Last week the FSC released its submission to the Quality of Advice Review, which importantly included our response to Treasury’s evaluation of the Life Insurance Framework (LIF). When drafting our submission we engaged NMG Consulting to work alongside us, and with our members, to demonstrate that LIF has worked by improving the quality of advice consumers received on risk products.
NMG Consulting also continued their underinsurance work for life insurance and Australians. By using a community standard NMG Consulting determined what the current underinsurance levels are across all cohorts of Australians. Their analysis found that under 45 year olds were the most underinsured segment of the market with a higher percentage found in small business owners and single parent families.
Based on current trends of advisers departing the market and the cost of providing advice proving to be a barrier to consumers to accessing it, there will be an overall increase of 17% to underinsurance levels by 2026 on current regulatory settings. If the commission arrangements on life risk products were removed, this underinsurance gap would subsequently increase to 28% by 2026.
Please contact Matthew Hawkes for more information.
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LEGAL
The FSC is writing to Treasury and ASIC to address ongoing concerns that members have raised in connection with the breach reporting framework.
The FSC is providing member feedback to the effect that the enhanced regime is not achieving its objectives of (a) ensuring that ASIC has appropriate information to identify emerging trends of non-compliance in the industry and (b) encouraging Australian Financial Services Licensees to effect timely remediation of non-compliance. Concerns about poorly designed legislation, significant deficiencies with the ASIC Portal and inadequate regulatory guidance imposing significant costs on industry are reiterated and the FSC is continuing its advocacy work with relevant contacts accordingly.
Please contact Ashley Davies for more information.
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TAX
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- The ATO released the final guidance notes for the Attribution MIT member annual (AMMA) statement and the standard distribution statement (SDS) for 2022, available from here
- The FSC and the Australian Custodial Services Association (ACSA) have been continuing their discussions with the ATO on a proposed approach to foreign capital gains and the Foreign Income Tax Offset cap after the Burton decision. Interested FSC members have been provided with a consultation document on this issue
- The FSC has organised a meeting with fund managers on Wednesday 13 June to discuss issues including an update on justified trust reviews and third party data governance
- The FSC signed a submission to the European Union on proposals for EU countries on tax treaty relief from withholding taxes. The submission was jointly signed with other funds management associations including EFAMA, The Investment Association (in the UK) and ICI (in the US). The final submission has been provided to interested members.
- The ATO has provided the FSC with a number of questions relating to the tax implications of implementing AASB17. The FSC’s response to the questions is being developed through the Life Tax Expert Group
- Members have been discussing the proposals of the Government to replace the existing thin capitalisation safe harbour debt test with a cap on interest deductions recommended by the OECD under Action 4 of its BEPS framework, particularly the impact of this change on insurers.
- The ATO provided the FSC with a holding statement in relation to non-arms' length expenditure/income (NALE/NALI), which was provided to members of the FSC Tax Expert Group (TEG)
- The ATO announced it would be extending its compliance approach for superannuation funds non-arms length income/expenditure for an additional 12 months to 30 June 2023, for more.
- The FSC and Insurance Council of Australia (ICA) jointly provided a submission on a draft Revenue NSW Commissioner's Practice Note on Interest and Penalty Tax. Revenue NSW made amendments to the final Practice Note in response to these submissions, and have agreed to draft a separate CPN for the insurance industry on what constitutes ‘reasonable care’.
Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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