Welcome to Issue 22 of the FSC Update – a fortnightly member briefing on the main legislative and regulatory changes right across the financial services industry. In this issue, the FSC team explores the Compensation Scheme of Last Resort, APRA’s project to upgrade their superannuation data collection and a Future of Advice Webinar.
To share any relevant feedback with the FSC about this issue, please This email address is being protected from spambots. You need JavaScript enabled to view it. the team.
Sally Loane, FSC CEO
Click on the topic of interest below to read more
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Draft Design and Distribution Obligations (DDO)
Advice Licensing and Compliance Working Group (WG)
ASIC Letter to Trustees regarding PMIF Communications
Portfolio Holdings Disclosure relief extended
Compensation Scheme of Last Resort
Are you interested in performance analytics?
Extension of the Consumer Data Right (CDR) to Superannuation?
Draft Privacy Safeguard Guidelines: Consumer Data Right (CDR): Consultation
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REGULATION UPDATE
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Draft Design and Distribution Obligations (DDO)
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Life insurance sub-group: The sub-group has largely completed the template Target Market Determination (TMD), and is finalising consideration about the inclusion of loss ratios in the review points for the TMD.
Fund management sub-group: The sub-group has reviewed comments on the draft TMD template by the platforms subgroup, relating to issues including definitions in the document, the language/tone of the document, disclaimers, and how to treat legacy products. The subgroup will be requesting assistance from advice licensees about the generic questions that are asked of advice clients, as this will inform the template TMD.
Platform distribution, superannuation, pension, WRAP and Master Trust sub-group: A joint meeting of the sub-groups is proposed once the fund managers and life insurers have reviewed the comments.
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Policy Briefing: Global regulatory trends with Jonathan Herbst, Norton Rose Fulbright's Global Head of Financial Services
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Join the FSC for an exclusive member only session where he will discuss emerging global regulatory themes for financial services.
The presentation will cover issues including:
- The global equivalents of the Australian DDO, PIP and BEAR regimes and financial compensation schemes.
- Changes in regulation of advice, commissions and other conflicted remuneration, the Consumer Data Right, and dealing with the wholesale/retail distinction.
- Regulatory trends for managed funds, particularly ETFs.
These themes occurring in Australia have their roots in other jurisdictions and the Australian regulators are looking to other regulators to learn about their regimes, and how they tackled the issues.
The presentation will look at how these changes have been addressed in the United Kingdom, Europe, Asia-Pacific and the United States and reflect on any challenges they created and any opportunities they may present
The seminar also will include partners from the global NRF financial services practice including Hong Kong, Singapore and Australia
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EVENT DETAILS - SYDNEY
- Thursday 28 November
- 4:00pm - 5:30pm
- Financial Services Council, King Room - Level 24, 44 Market St Sydney
- Cost: Free
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EVENT DETAILS - MELBOURNE
- Friday 29 November
- 10:00am - 11:30am
- Norton Rose Fulbright, Level 15, RACV Tower, 485 Bourke St, Melbourne
- Cost: Free
For Melbourne readers, please register This email address is being protected from spambots. You need JavaScript enabled to view it..
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ADVICE
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The ASIC v Westpac of the full Federal Court could have profound implications for Advice in due course. FSC is engaging ASIC on its forthcoming project relating to General Advice. This is an issue which is likely to become more prominent in debates about the future of Advice, given both this court decision and the seismic changes that implementing the Royal Commission recommendations mean for consumers and businesses.
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FASEA’s recently released Guidance on the Code of Ethics presents some highly problematic issues for industry with regard to its lack of clarity and its timeline. Industry as of today has 34 business days to comply. The FSC is urgently engaging Government on these issues.
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Advice Licensing and Compliance Working Group (WG)
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The new WG also met for the first time this week to establish its priorities and policy development relating to the Royal Commission. The Advice Licensing Framework WG has been rolled into the Advice Licensing and Compliance WG. Members of that group will be invited to join the Advice Licensing and Compliance WG if they are not already represented.
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Revenue NSW meeting.
The FSC is meeting with Revenue NSW to discuss the payroll tax treatment of financial advisers on the morning of 13 November.
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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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The advice industry is undergoing an extraordinarily challenging shift, with advisers transitioning to a profession and business models rapidly changing.
We know that for consumers, a professional adviser can vastly improve financial outcomes. With 700 Australians retiring every day and entering an increasing complex investment environment, quality advice is needed now more than ever.
So, what does this mean for the future of advice?
Join the FSC and industry leaders for an in-depth webinar session involving keynotes and a panel discussion exploring both the critical issues and vast opportunities currently on the horizon for the Australian market.
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EVENT DETAILS
- Wednesday 4 December
- 12:30pm - 2:30pm
- Online
- Cost: Member Rate: $150.00pp.
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SUPERANNUATION
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As part of APRA’s project to upgrade their superannuation data collection, a discussion paper, two short topic papers, and two draft reporting standards have been released for comment.
This consultation package relates to data collection relating to the structure and profile of RSEs. The draft SRS 605.0 is intended to collect data on all products within an RSE, and SRS 606.0 proposes to collect the number of members in each product and the member assets in each product, investment menu and investment option.
Further consultations on additional data collection will occur over the coming year.
The FSC will form a sub-group of the Superannuation Technical Working Group to deal with these ongoing consultations.
.ASIC Letter to Trustees regarding PMIF Communications
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ASIC has issued a letter to industry, along with a media release, relating to member communications around the Protecting Your Super and Putting Members Interests First reforms.
The letter outlines findings from ASIC’s review of initial PYS communications, and expectations around providing balanced, factual and tailored communications to members in relation to upcoming changes.
The letter also highlights that ASIC will be monitoring communications by third parties in relation to the reforms, as well as those issued by trustees.
The FSC will continue to engage with ASIC as implementation of the PMIF changes progresses to share insights and address issues as they arise.
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Portfolio Holdings Disclosure relief extended
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On 29 October, ASIC announced that they will extend the existing Class Order relief for Portfolio Holdings Disclosure for 12 months, to 31 December 2020.
Treasury have yet to provide a timeline for the release of regulations to support the legislation passed earlier this year.
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TAX
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- The FSC is finalising a submission to the ATO on a draft Tax Determination about the Foreign Income Tax Offset (FITO) & Foreign capital gains (TD 2019/D10). The FSC is proposing to raise concerns that the draft TD may cause double taxation and is not consistent with other ATO products and the approach taken in various Double Tax Agreements.
- The FSC Tax Expert Group is considering:
- Issues relating to the MIT start-up concession. Members are concerned that the timeframe for the concession is too short, making it hard for new funds to meet the widely held/not closely held tests.
- Tax issues relating to Fintech as part of a submission to a Senate Inquiry into Fintech. This will include the tax barriers to product modernisation/rationalisation, which restrict the ability for investors to switch into Fintech products (and other modern financial products).
- Issues relating to the removal of the primary residence CGT exemption for non-residents.
- The Board of Tax has indicated that it has received 14 submissions on corporate tax residency and will release a consultation paper on potential reform proposals later this year.
- The List of Information Exchange Countries has been updated to include 8 new countries. Distributions to these countries are eligible for lower withholding tax rates. See here.
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- The FSC is preparing submissions to two NSW reviews: a general review by the NSW Productivity Commission, and a review of Federal Financial Relations by the NSW Government. For both submissions, the FSC will argue for the removal of stamp duties paid by life insurers, and for reforms to the treatment of payroll tax for financial advisers.
- The FSC has organised a meeting to discuss the payroll tax treatment of financial advisers with Revenue NSW on the morning of 13 November, particularly to discuss how payroll tax applies to small businesses/sole traders that are licenced by a large advice licensee.
- The next meeting of the FSC GST Expert Group is scheduled for the afternoon of Wednesday 20 November. The meeting will consider ATO justified trust activity relating to GST; draft GST rulings on financial supplies and PCG on the estimates regime; and GST issues relating to remediation and ending of grandfathered conflicted remuneration (including commissions).
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INVESTMENTS
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Compensation Scheme of Last Resort
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The Financial Services Royal Commission recommended that a Compensation Scheme of Last Resort (CSLR) be established. The Government’s Royal Commission Implementation Roadmap has outlined the timeframe for the scheme, with the CSLR to be established by no later than December 2020.
The scheme is a last resort mechanism which will compensate consumers where they have an AFCA determination or court decision in their favour for misconduct - and the financial services firm is unable to pay the compensation.
The FSC has been considering the CSLR and the recommendations of the Ramsay Review outlining how such a scheme could be developed. It is important that the scheme is developed with equitable and sustainable scheme design principles.
Furthermore, the focus should not just be on introducing a CSLR but also on reducing the risk to consumers of ending up with unpaid determinations. The advice licensing regime needs to be strengthened to ensure financial advice licensees can be appropriately equipped to meet their obligations to customers should things go wrong.
The Compensation Scheme of Last Resort Working Group is considering CSLR related issues.
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Are you interested in performance analytics?
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The FSC is refreshing the Performance Analytics Distribution List. This group is a distribution list for those interested in performance analytics and reporting for information on Government reviews and submissions, GIPS and events. Who is it suitable for? If you, or your staff, are involved in investment performance analytics or reporting, or are involved in GIPS compliance or verification, you may want to join this distribution list to receive relevant information.
If you would like to join this list please email Jill Reyes at This email address is being protected from spambots. You need JavaScript enabled to view it.
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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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LEGAL
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Readers would be aware that the Federal Court dismissed proceedings brought by APRA against a superannuation trustee and certain directors and executives. APRA indicated that it did not intend to lodge an appeal against that decision. See here.
However, in an interesting development, ASIC has additional conditions on the entity’s Australian financial services licence (when the entity applied for a variation of its licence as part of a corporate restructure). See here.
The additional conditions require that for the entity which it was proposed conduct managed fund and IDPS activities, that:
- There be a majority of independent directors having appropriate experience in these areas;
- an internal Office of the Responsible Entity with oversight and reporting responsibilities be established; and
- an independent expert be appointed \ to report on the implementation of the conditions.
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Extension of the Consumer Data Right (CDR) to Superannuation?
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A Senate Select Committee has been established with the following remit:
The Senate Select Committee on Financial Technology and Regulatory Technology has been established by the Senate to undertake a comprehensive inquiry into the current state of Australia's FinTech and RegTech industries, and investigate opportunities for government to promote effective and sustainable growth in these sectors in order to enhance Australia's economic competitiveness.
(Issues Paper discussed below).
A relevant link is here.
On 23 October, the Committee released an Issues Paper (which may be sourced from the above link). The Paper mooted potential reforms to extend the CDR to superannuation.
Submissions to the inquiry relating to fintech and regtech may be made until 31 December.
It is anticipated that the Committee will present a final report on or before the first sitting day in October 2020.
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Draft Privacy Safeguard Guidelines: Consumer Data Right (CDR): Consultation
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The OAIC has commenced its consultation on its draft Privacy Safeguard Guidelines for the CDR.
The Guidelines cover a range of topics including
- how CDR data can be collected,
- dealing with unsolicited CDR data,
- notification,
- the use and disclosure of CDR data and
- data security.
The draft Privacy Safety Guideline may be found here.
Submissions are being accepted until 20 November.
It is anticipated that final Guidelines will be released on 16 December.
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