Financial Services in Focus – Issue 7

Funds and financial products

Government consults on the revised exposure draft of Design and Distribution Obligations and Product Intervention Power Bill

On 20 July, the Government has released for public consultation a revised exposure draft of the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018 (Bill) and an Exposure Draft Explanatory Materials. Treasury also released an Information Note summarises the key changes from the previous version of the Bill.

The revised exposure draft of the Bill has been developed in response to the feedback received during the Government’s previous round of consultation.

The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer, stated that the Design and Distribution Obligations and the Product Intervention Power will ensure that financial products are targeted and sold to the right consumers, and where products are inappropriately targeted or sold, ASIC will be empowered to intervene in the distribution of the product to prevent harm to consumers.

The consultation closes on 15 August.

Government releases tranche 2 of CCIV Bill

On 19 July, the Government released the second tranche of the Treasury Laws Amendment (Corporate Collective Investment Vehicle) Bill 2018 (exposure draft) and Exposure Draft Explanatory Materials. Treasury has also released a consultation cover note.

The exposure draft includes drafting in relation to the external administration of a Corporate Collective Investment Vehicle (CCIV) in a winding up the situation, the application of the Chapter 7 financial services regime to CCIVs and the liability of the corporate director of a CCIV for contraventions of the law by the CCIV.

The Explanatory Materials also include a description of the proposed penalties framework for CCIVs and the proposed approach to takeovers, compulsory acquisitions and buy-outs of a CCIV, however, the provisions for these aspects of the CCIV Bill are under development.

Treasury states that the CCIV will offer an internationally recognisable investment vehicle which can be readily marketed to foreign investors, including through the Asia Region Funds Passport.

The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer, stated that this measure complements the Asia Region Funds Passport initiative which passed the Parliament on 28 June.

Submissions are due by 10 August.

Financial product advice

FASEA releases draft examination guidance

On 11 July, the Financial Adviser Standards and Ethics Authority (FASEA) released draft guidance, Consultation Paper 3: Financial Adviser Examination. The examination is an essential component of the educational qualifications that all advisers need to pass before they can provide personal advice to retail clients.

FASEA states advisers that are registered as authorised representatives prior to 31 December 2018 will be required to pass the examination before 1 January 2021. From January 2019, new entrants or those returning to the industry are required to pass the exam after they have completed their tertiary degree, and before the commencement of their professional year.

FASEA further states that the examination will test the practical application of adviser knowledge in the following competency areas:

  • Corporations Act (emphasis on Chapter 7 - financial services and markers)
  • the FASEA Code of Ethics
  • behavioural Finance - client and consumer behaviour, engagement and decision making
  • financial advice construction - suitability of advice aligned with different consumer groups and
  • applied ethical and professional reasoning and communication.

Submissions are due by 31 July.

Anti-money laundering

FATF releases draft risk-based approach guidance for public consultation

On 6 July, the Financial Action Task Force (FATF) released a draft guidance, Public Consultation on the Draft Approach Guidance for the Securities Sector, for public consultation by private sector stakeholders.

The FATF states that it is currently developing the guidance to assist countries, competent authorities and the securities sector in the application of a risk-based approach to anti-money laundering/counter-financing of terrorism. According to the FATF, the guidance is intended to provide support both to the private sector and to supervisors, by focusing on money-laundering/terrorism-financing risks and associated mitigation measures. The draft guidance contains a section on specific guidance for securities providers and intermediaries and suspicious activity indicators in relation to the securities sector.

Submissions are due by 17 August.

Other financial services regulation

Government releases subsequent discussion paper on Modernising Business Registers

On 13 July, the Government released a discussion paper, Modernising Business Registers Program, following its release in August 2017 of an initial discussion paper, Modernising Business Registry Services.

Treasury states that following on from previous feedback and advice from relevant agencies, the subsequent discussion paper has been released for consultation focusing on four areas that it would like to engage with stakeholders on legislation, registry services enhancements, funding registry infrastructure and Director Identification Numbers.

Submissions are due by 17 August.

ALRC releases discussion releases discussion paper on litigation funders

On 31 May, the Australian Law Reform Commission (ALRC) released a Discussion Paper, Inquiry into Class Action Proceedings and Third-Party Litigation Funders, in relation to its inquiry into class action proceedings and third-party litigation funders.

One of the key proposals in the discussion paper is for the Corporations Act to be amended to require third party litigation funders operating in Australia to obtain and maintain a ‘litigation funding licence’ which attracts similar obligations to an AFSL. This proposal echoes findings made by the Productivity Commission in 2014 that litigation funders be specifically licenced to ensure they hold adequate capital to manage their financial obligations. Presently, litigation funders are exempted from the requirement to hold an AFSL provided they have adequate processes in place to manage conflicts of interest. Litigation funding is also exempted from the Consumer Credit Code and the definition of a managed investment scheme. The Commission has proposed that ASIC would be the appropriate regulator for litigation funders under the proposed licensing regime.

Submissions are due by 30 July.


Government consults on reforms to Australian Business Number system

On 20 July, the Government released a consultation paper, Tackling the Black Economy: Designing a modern Australian Business Number system.

The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer, stated the consultation paper seeks views on designing a modern ABN system — one that provides improved confidence in the identity and legitimacy of Australian businesses, without adding unnecessary complexity or compliance costs.


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