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Issue 553, 15 December 2014 

In this issue: 

 

Fee and cost disclosure: ASIC Class Order and consultation on RG 97 

After a lengthy period of consultation on fee and cost disclosure in product disclosure statements (PDSs), ASIC has now issued an extensive Class Order, revising and clarifying some disclosure requirements for both PDSs and periodic statements. ASIC has also commenced the process of updating Regulatory Guide 97: Disclosing fees and costs in PDSs and periodic statements (RG 97), by releasing a draft for public comment. 

Class Order [CO 14/1252] makes a number of modifications to Part 7.9 of the Corporations Act 2001 and Schedule 10 of the Corporations Regulations 2001. In particular, [CO 14/1252]: 

The Class Order provides a transition period to allow issuers to update their systems and procedures to comply with the amendments. 

ASIC has previously indicated its intention to update RG 97 during this financial year. ASIC has now released a draft of its proposed update to RG 97, which: 

If you have any comments you would like ASFA to consider including in our submission, please email them to Julia Stannard by close of business Friday 6 February 2015. 

 

Low income super contribution: ASIC extends disclosure relief 

ASIC has extended its Class Order relief from the requirement to disclose the low income superannuation contribution (LISC) separately from the government co-contribution (GCC) on members’ periodic statements. 

Under relief that was due to expire on 31 December 2014 (Class Order [CO 13/1420]), ASIC has not required trustees to disclose the LISC and GCC separately on a member’s periodic statement, provided the statement complied with a number of conditions. In general terms, these require the trustee to: 

When [CO 13/1420] was made, it was the intention of the government to pass legislation that would have meant the LISC was payable only for a single year, 2012/13. That legislation failed to pass the senate. The government subsequently revised its intentions regarding the LISC, and legislation was passed that provides that the LISC will now be payable for financial years up to and including 2016/17. 

ASIC has now issued a Class Order [CO 14/1249], extending its disclosure relief in relation to the LISC and GCC so that it applies to periodic statements for reporting periods ending on or before 30 June 2015, subject to the same conditions as noted above. The six-month extension of the relief is intended to give trustees further time to make appropriate changes to deal with the ongoing separate reporting of LISC. 

 

Minister for Small Business announces superannuation changes 

The Minister for Small Business, the Hon. Bruce Bilson, announced by press release on 26 November 2014, the following changes to the superannuation system, with effect from 1 July 2015: 

It is ASFA’s understanding that the SBSCH change can be implemented by ATO administrative action as the current threshold is not set in legislation. 

With respect to the last item, funds will need to provide the employer with the necessary information to ensure that future contributions for default fund employees are correctly directed following a fund merger. 

 

‘Over the counter’ derivatives: proposed changes and working group 

In ASFA Action Issue 537 dated 26 May 2014 and 551, dated 24 November 2014, we informed members of the requirements of the ASIC Derivative Transaction Rules (Reporting) 2013, which will impose ‘over the counter’ (OTC) derivative reporting requirements on Australian financial services licence (AFSL) holders (referred to as ‘Phase 3’ reporting entities), which includes superannuation funds who hold OTC derivative contracts. 

The government has announced that it intends to implement a range of reforms to make OTC markets safer and ensure that regulatory reforms do not impose an unnecessary compliance burden on the industry. These reforms include: 

Importantly, financial service organisations that engage in small amounts of OTC derivative activity will benefit from ‘single-sided’ reporting relief, provided they conclude their derivatives transactions with counterparties that are already required to report the trade. This will apply to all ‘Phase 3B’ entities as defined in the trade reporting rules. This means that the trade reporting compliance burden will mainly fall on larger financial institutions that are systemically important, while still providing regulators with information they need to effectively supervise OTC derivatives markets. 

The government has indicated that a ministerial determination and regulations giving effect to these reforms will be made available for public consultation in early 2015. 

Separately, as commencement of the Phase 3A and 3B reporting requirements approaches, ASFA has been asked to remind affected trustees that they may need to consider registering their intention to report with the licensed trade repository DTCC Data Repository (Singapore) PTE (DTCC). This is a non-binding intention and will ensure that the trustee is added to the weekly working group call and all communication around trade reporting developments for ASIC. 

At the weekly working group meetings, DTCC will run through: 

To register your intent, or if you have any questions, please contact Struan Lloyd of DTCC directly. If you have further questions on trade reporting please contact David Graus. 

 

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