Financial Services in Focus – Issue 33

Funds and financial products

APRA releases response to submissions on proposed Reporting Standard ARS 722.0 Derivatives

On 18 November, APRA released its response to submissions on a proposed Reporting Standard ARS 722.0 ABS/RBA Derivatives (ARS 722.0) within the Economic and Financial Statistics (EFS) data collection.

ARS 722.0 will be used to collect quarterly data on the derivatives activity of authorised deposit-taking institutions and registered financial corporations.

APRA states its new approach to ARS 722.0 will provide greater certainty about reporting obligations and will reduce the reporting burden for most financial sector entities.

The response letter, and the clean and marked-up versions of the reporting standard and reporting practice guide, are available here.

Financial product advice

ASIC outlines approach to advice licensee obligations for the financial adviser code of ethics

On 26 November, ASIC stated it has taken action to provide certainty to AFS licensees that they will not be in breach of the law because their financial advisers were not able to register with an ASIC-approved compliance scheme by 1 January 2020, as originally required.  Under ASIC Corporations (Amendment) Instrument 2019/1145, ASIC granted a three-year exemption to all AFS licensees from the obligation in the Corporations Act to ensure that their financial advisers are covered by an ASIC-approved compliance scheme and from the associated notification obligations, as a result of the Government’s announcement in October that it will establish a new disciplinary system and single disciplinary body for financial advisers as recommended by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

ASIC states that financial advisers will still be required to comply with the Financial Planners and Advisers Code of Ethics 2019 from 1 January 2020, which was established by FASEA, and AFS licensees will still be required to take reasonable steps to ensure that their financial advisers comply with the code.  However, after consultation with FASEA, ASIC states that it will take a facilitative approach to compliance with Standards 3 and 7 of the Code until the proposed new single disciplinary body for financial advisers is operational.

Financial markets

Council of Financial Regulators consult on financial market infrastructure regulatory reforms

On 15 November, the Council of Financial Regulators (CFR) released a consultation paper seeking comments on proposed financial market infrastructure regulatory reforms.

The CFR Consultation Paper Financial Market Infrastructure Regulatory Reforms includes changes to the licensing and supervision frameworks for financial market operators, benchmark administrators, clearing and settlement facilities and derivatives trade repositories, and a new crisis management regime for clearing and settlement facilities.  The proposals aim to provide ASIC and the RBA with strong and effective powers to continue to fulfil their regulatory responsibilities.

Submissions close on 20 December.

Anti-money laundering

Senate refers AML bill for inquiry

On 14 November, the Senate referred the provisions of the Anti-Money Laundering and Counter-Terrorism Financing and Other Legislation Amendment Bill 2019 to the Legal and Constitutional Affairs Legislation Committee for inquiry and report by 7 February 2020.

The bill would amend a number of Acts to strengthen Australia’s capability to combat money laundering and financing of terrorism.  The bill would also create a new offence under the Australian Federal Police Act 1979 of dishonestly representing conferral of police awards.

Submissions are due by 13 December.

AUSTRAC report on illegal phoenix activity indicators

On 30 October, Fintel Alliance, an AUSTRAC initiative, released a report to help industry identify and report on the common indicators of illegal phoenix activity.

AUSTRAC states that while the report examines illegal phoenix activity in the labour hire industry, the indicators are also relevant to other businesses that mainly pay their staff and suppliers in cash.

Other financial services regulation

APRA proposes changes to prudential standard governing insurance in superannuation

On 25 November, APRA released for consultation proposed revisions to Prudential Standard SPS 250 Insurance in Superannuation.  The consultation letter and the clean and marked-up versions of the draft prudential standard can be found here.

APRA states that the proposed changes are aimed at improving superannuation member outcomes by helping trustees select the most appropriate policies for their members, and monitor their ongoing relationships with insurers, and respond to two of the recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry Final Report.

The consultation closes on 3 February 2020 and APRA will finalise the prudential standard by mid-2020.  The revised standard will come into effect on 1 January 2021.

Treasury releases Retirement Income Review consultation paper

On 22 November, the Treasury released for public consultation the Retirement Income Review consultation paper.

Treasury states the consultation paper outlines some of the issues the Retirement Income Review Panel will be considering and is intended as a guide to those making a submission.

Consultation closes on 3 February 2020.

APRA releases report on APRA’s approach to governance, culture, remuneration and accountability risks

On 19 November, APRA released Information Paper Transforming governance, culture, remuneration and accountability: APRA’s approach (Information Paper).

The Information Paper sets out APRA’s enhanced approach to overseeing governance, culture, remuneration and accountability (GCRA), and reflects a strategic decision to take a more intensive regulatory approach to GCRA, with a view to transforming GCRA practices across the financial system.

The Information Paper states that this more intensive approach to GCRA responds to the recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and the Final Report of the Australian Prudential Regulation Authority Capability Review.

APRA unveils MySuper ‘heatmap’

On 15 September, APRA unveiled its MySuper ‘heatmap’, which APRA states will provide stakeholders with insights into the outcomes being delivered by RSE licensees, in particular investment returns and fees and costs, by providing information that is credible, clear and comparable for all MySuper products.

APRA released Information Paper Heatmap – MySuper products, which contains detailed explanations of how APRA selected the metrics and benchmarks used in the heatmap, and the methodology used to take into account important differences in products’ investment strategy and asset allocation.

APRA also made a heatmap with mock data available to illustrate how the heatmap will use a graduating colour scheme to provide clear and simple insights into MySuper products across three areas: investment performance, fees and costs, and sustainability of member outcomes.

APRA states the full heatmap will be published on the APRA website by mid-December.

APRA releases guidance on the implementation of the Putting Members' Interests First Legislative Amendments

On 14 November, released a letter to all RSE licensees outlining new guidance for the implementation of the Treasury Laws Amendment (Putting Members' Interest First) Act 2019.

This guidance includes details on the dangerous occupation exception election and withdrawal templates and answers to frequently asked questions.

ASIC guidance on whistleblower policies

On 13 November, ASIC released guidance on the whistleblower protections under the Corporations Act.

The guidance is set out in Regulatory Guide 270 Whistleblower policies (RG 270).

In releasing RG 270, ASIC states that RG 270 sets out the components that a whistleblower policy must include to comply with the law, namely the following:

  • types of matters covered by a policy;
  • who can make and receive a disclosure;
  • how to make a disclosure;
  • legal and practical protections for disclosers;
  • investigating a disclosure; and
  • ensuring fair treatment of individuals mentioned in a disclosure.

RG 270 also provides ‘good practice guidance’ to assist companies develop and implement policies that are tailored to their operations.

In addition to the release of RG 270, ASIC states it is granting relief to public companies that are not‑for‑profits or charities with annual revenue of less than $1 million from the requirement to have a whistleblower policy.  The relief is set out in ASIC Corporations (Whistleblower Policies) Instrument 2019/1146.


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