Financial Services in Focus – Issue 13

Funds and financial products

Corporate Collective Investment Vehicle - tranche three

On 12 October, the Government has released for public consultation the third tranche of the Treasury Laws Amendment (Corporate Collective Investment Vehicle) Bill 2018 and related explanatory materials.

The package comprises the exposure draft of tranche 3 of the Bill, Exposure Draft Explanatory Materials and a consultation cover note.

Treasury states that the tranche 3 exposure draft includes:

  • the independence requirement for the depositary - whose responsibility it is to safeguard the fund's assets and oversee some of the activities of the fund;
  • arrangements and reconstructions, receivership and winding up;
  • deregistration of sub-funds and CCIVs;
  • takeovers, compulsory acquisitions and buy-outs, and disclosure requirements; and
  • other consequential amendments to the Asia Region Funds Passport, Chapter 9 (Miscellaneous provisions), the ASIC Act and the Personal Property and Securities Act 2009 (Cth) to accommodate the new CCIV regime.

Consultation closes on 26 October.

ASIC signs fintech agreements with Luxembourg and the US regulators

On 5 October, ASIC stated that it and the US Commodity Futures Trading Commission (CFTC) signed an arrangement to cooperate and support innovation through each other’s financial technology (fintech) initiatives – CFTC’s LabCFTC and ASIC’s Innovation Hub.

On 4 October, ASIC stated that it and Luxembourg Commission de Surveillance du Secteur Financier signed a Cooperation Agreement which provides a framework for co-operation to understand financial innovation in each jurisdiction.

ACCC commences inquiry into foreign currency conversion services

On 2 October, the ACCC announced that it will commence a new inquiry into foreign currency conversion services, in particular services that enable the sending of money overseas and purchasing of foreign currency.

The ACCC will examine price competition amongst suppliers of foreign currency conversion services and consider how easily potential entrants to the market can compete. The ACCC’s inquiry is initiated under Part VIIA of the Competition and Consumer Act (2010) (Cth) and will afford the ACCC with compulsory information gathering powers.

The ACCC has released an issues paper, Inquiry into foreign currency conversion services: Issues Paper, and encourages all parties to provide their views and experiences to the inquiry by 22 October.

ASIC states all MDA providers now required to be licensed

On 1 October, ASIC stated that all managed discretionary account (MDA) providers that from 1 October 2018 AFSL with an MDA-specific ‘dealing by issue licence authorisation.

MDAs are also known in the industry as separately managed accounts, individually managed accounts, investment advisory programs or managed discretionary portfolio services.

ASIC stated that it gave notice of the revised AFSL requirements in September 2016 and that it intends to undertake reviews to check that MDA providers hold the relevant AFSL authorisations and will take action if any unlicensed activity is identified.

Financial product advice

ASIC announces action on compliance breaches with fees disclosure and renewal notices

On 12 October, ASIC announced a review of compliance with requirements for Fee Disclosure Statements and Renewal Notices in the financial advice sector.

ASIC states that it has received a number of breach reports from licensees which indicate they may have failed to comply with the Fee Disclosure Statement (FDS) and Renewal Notice requirements that were implemented as part of the Future of Financial Advice (FOFA) reforms in 2013, and that ASIC is investigating these reports and will take enforcement action where breaches are substantiated.

ASIC states that it will examine to what extent advice licensees:

  • issue FDSs and Renewal Notices to customers;
  • issue FDSs and Renewal Notices within the time frames set out by the law;
  • include the required content in the FDSs;
  • ensure the content of FDSs is accurate, for example, in describing what customers are charged for and what services customers have received;
  • have appropriate procedures in place to ensure fees for ongoing services are discontinued when the arrangements are terminated as a result of licensees failing to comply with the FDS or Renewal Notice requirements.

ASIC releases new instrument regarding financial adviser professional standards reforms

On 10 October, ASIC released a new legislative instrument, ASIC Corporations (Professional Standards—Transitional) Instrument 2018/894, relating to the professional standards reforms for financial advisers.

ASIC states that the new instrument makes:

  • changes to the reporting dates for a number of disclosure obligations in the transition to the new financial adviser professional standards reforms; and
  • minor technical amendments to address unintended consequences to ensure that the new education and training standards apply in a consistent way to individuals at the intended time.


Banks agree to end fees for no service and grandfathered payments

On 10 October, in response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the Australian Bankers' Association (ABA) announced that the Banking Code of Practice will be changed to end ‘fees for no service’, and to improve the way banks manage a deceased estate.

Once notified of a customer’s death, banks will proactively identify fees that are for products and services that can no longer be provided in the circumstances, and stop charging those fees and refund any paid.

Further, the ABA said it will seek new legislation to end grandfathered payments and trail commissions for financial advisers.

Financial markets

ASIC provides relief and updates guidance of short selling

On 8 October, ASIC issued a new legislative instrument, ASIC Corporations (Short Selling) Instrument 2018/745, that provides various relief and modifications to the laws in relation to short selling, and continues the effect of other ASIC instruments that were due to expire.

ASIC has also updated its existing guidance in Regulatory Guide 196 Short selling to reflect the legislative instrument.

ASIC states the new relief and modifications are summarised as follows and cover:

  • legislative relief for ETF market makers;
  • deferred settlement trading;
  • initial public offering (IPO) sell downs; and
  • an option for global firms to calculate their short positions as at a global end calendar time.

Other financial services regulation

Government consults on additional legislation to modernise business registers

On 16 October, the Government released the second part of the draft legislation to allow the modernisation of business registers and to provide better support for businesses in an evolving digital economy.

The draft legislation and accompanying material are available on the Treasury website.

The Assistant Treasurer, the Hon Stuart Robert MP, said that legal registers administered by ASIC, and the Australian Business Register will be moved to a modern registry platform, and administered by the Australian Business Registrar within the Australian Taxation Office.

Consultation closes on 26 October.

Exposure draft legislation regarding mutual entities released for public consultation

On 4 October, the Government released or public consultation an exposure draft of the Treasury Laws Amendment (Measures for a later sitting) Bill 2018: Mutual entities and accompanying Exposure Draft Explanatory Materials.

The Bill introduces a definition of a mutual entity and removes the uncertainty for transferring financial institutions and friendly societies in respect of the demutualisation provisions in Part 5 of Schedule 4 of the Corporations Act.

Interested parties may submit responses to this consultation up until 1 November via the Treasury website.

ASIC’s mandate changed to require ASIC to take into account competition in financial system

On 3 October, the Treasury Laws Amendment (Enhancing ASIC's Capabilities) Bill 2018 received Royal Assent.

The Bill amends the ASIC Act to require that ASIC must consider the effects that the performance of its functions and the exercise of its powers will have on competition in the financial system.

According to the Explanatory Memorandum, the Bill makes an explicit reference to the effect that ASIC must take competition issues into account and that this would oblige ASIC to consciously consider how its actions may impact on competition in the financial system and will enable ASIC to favour one option over another due to its effects on competition.


Tax integrity measures Bill receives Royal Assent

On 3 October, the Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018 received Royal Assent.

The Explanatory Memorandum states that the Bill contains the a number of measures, including amendments the income tax law and the Venture Capital Act 2002 (Cth) to ensure that the venture capital tax concessions are available for investments in fintech businesses, which apply in relation to investments made on or after 1 July 2018.


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