Search
Close this search box.
Issue 656, 22 December 2017 
In this issue: 

 

Fee and cost disclosure: ASIC relief 

ASIC has extended the time period for some interim arrangements for fee and cost disclosure for product disclosure statements (PDSs) and periodic statements. 

As a result of a joint application to ASIC made by ASFA, the Australian Institute of Superannuation Trustees and the Financial Services Council for transitional relief for certain fee and cost disclosure requirements for periodic statement and PDSs, ASIC today has made legislative instrument ASIC Corporations (Amendment) Instrument 2017/1138. 

Instrument 2017/1138 extends the time period for some interim arrangements for fee and cost disclosure for periodic statements, originally in place until 30 June 2018, to allow them to operate for an additional year. The Instrument also extends the time period for some interim arrangements for PDSs, originally in place until 30 September 2018, to allow them to operate for an additional year. 

The Instrument makes various modifications to the provisions of Schedule 10 of the Regulations and amends Class Order [CO 14/1252] as specified in Schedule 1 to the Instrument. 

 

 

Early release of superannuation: consultation 

As reported in ASFA Action issue 654, the government has asked Treasury to review the current rules governing early release of superannuation on grounds of severe financial hardship and compassionate grounds, and whether superannuation assets should be available to pay compensation or restitution to victims of crime. 

The Minister for Revenue and Financial Services, Kelly O’Dwyer MP, has noted that key issues raised with her include: 

Treasury has now released an issues paper seeking views on these and other matters relevant to the review. 

Other existing grounds for early release of superannuation benefits, such as for terminal medical conditions, incapacity, or departing Australia will not be considered as part of the review. However, the paper does ask whether the existing compassionate grounds for early release should be expanded – for example to allow a release to victims of domestic violence. 

If you have any feedback you would like ASFA to consider including in a response to Treasury, please forward it to Fiona Galbraith by close of business Monday 29 January. 

Treasury will provide a report and recommendations to government in March. 

 

 

Design and distribution obligations and product intervention power: draft legislation 

Treasury has released a draft of legislation to implement proposed new ‘design and distribution’ obligations for financial services providers and a product intervention power for ASIC, taking up recommendations made in the final report of the Financial System Inquiry. 

The proposed design and distribution obligations will generally apply to financial products—including superannuation products—that require disclosure in the form of a product disclosure statement (PDS). Some products will be exempt from the new obligations, however, including MySuper products. Key elements of the new regime include: 

ASIC will be provided with powers to enforce the regime, including the ability to request necessary information and issue stop orders. A person who suffers loss or damage because of a contravention of the design and distribution obligations may recover that loss by civil action. 

The new design and distribution obligations are intended to commence—and apply to new financial products—12 months after the legislation receives Royal Assent. Existing financial products (those first offered before the new law commences) will become subject to the new regime 24 months after Royal Assent. 

Under the proposed product intervention power, ASIC will be able to proactively intervene in relation to financial products by making orders to prohibit specified conduct related to the product. ASIC will be required to consult affected parties before making the intervention orders and must make all orders public. The power can be used where ASIC is satisfied that a product or class of products has resulted, or is likely to result, in significant detriment to retail clients. Intervention orders issued by ASIC may last up to 18 months, unless extended by the Minister. 

The power is intended to apply prospectively from the day after the legislation receives Royal Assent – it will only apply in relation to products acquired by consumers on or after the commencement date. 

Treasury is seeking submissions on the draft legislation by 9 February. 

 

 

Royal Commission into banking, superannuation and financial services 

The government has now finalised the formal details for its Royal Commission into misconduct in the banking, superannuation and financial services industry. 

The terms of reference, set out in the formal letters patent for the Commission, differ slightly from the draft released in December. Of particular relevance for superannuation, the Commissioner, Kenneth Hayne, is required to inquire into matters including whether: 

The Commissioner has been authorised to provide an interim report to the government by 30 September 2018, and is required to provide his final report and recommendations not later than 1 February 2019. 

The government has also established a dedicated website for the Commission. 

 

 

Compensation scheme of last resort: Ramsay Review supplementary report 

The government has released the supplementary final report from the Ramsay Review of the external dispute resolution framework, focussing on the establishment of a compensation scheme of last resort (CSLR) and providing redress for past disputes. 

The report recommends that a CSLR should be established, but should initially be restricted to financial advice failures where a financial adviser has provided personal and/or general advice on ‘relevant financial products’—including superannuation products—to a consumer or small businesses. However, the CSLR should be designed for the future and accordingly be scalable, which means it could be expanded over time to cover other types of financial and credit services should evidence of significant problems of uncompensated losses emerge. Any CSLR should be prospective, and should only apply to unpaid external dispute resolution determinations, court judgments and tribunal awards which are made after the CSLR is established. 

The Review also considered the merits of providing access to redress for past disputes in circumstances where a dispute was of a type that could be resolved via external dispute resolution but, for various reasons, was not resolved. The Review did not make any formal recommendations, but made a number of observations. These include noting its view that there is merit in considering providing access to redress in some circumstances, but there are a number of complex issues that would need to be resolved. 

The government has indicated it will defer its consideration of, and response to, the report until the conclusion of the Royal Commission into misconduct in the banking, superannuation and financial services industry. 

 

 

May 2016 Budget reforms: ATO guidance updated 

The ATO has updated some of the guidance material issued in relation to the superannuation reforms announced in the May 2016 Budget: 

The updated guidance took effect on 20 December 2017. 

 

 

AML/CTF: new exemption to assist law enforcement 

AUSTRAC has amended the anti-money laundering and counter-terrorism financing (AML/CTF) rules to provide reporting entities with a temporary exemption from certain AML/CTF obligations in circumstances where compliance with those obligations could undermine law enforcement agencies’ investigations into a customer of the entity. 

AUSTRAC is aware of instances when law enforcement enquiries with reporting entities about the activities of certain customers have adversely affected the progress of related law enforcement investigations. The issue arises when reporting entities undertake actions, in line with their AML/CTF obligations, which have the effect of alerting customers to possible closer scrutiny of their financial transactions. Customers then cease their activities with the reporting entity, thus limiting the ability of law enforcement officers to investigate the financial transactions. 

To address this, AUSTRAC has issued the Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2017 (No. 4). The Instrument, which commenced on 21 December, inserts new chapter 75 into the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1). 

New chapter 75 provides that a requesting officer of an eligible agency can request the AUSTRAC CEO to exempt a reporting entity from specified sections of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 when providing a designated service to a customer, if the officer has a reasonable belief that the provision or continued provision of the designated service to that customer would assist the agency in the investigation of a serious offence. The sections to which the exemption applies include specific obligations in relation to carrying out of customer identification procedures, verification of a customer’s identity and ongoing due diligence. 

Chapter 75 does not require a reporting entity to cooperate with the investigation, or otherwise continue to provide a designated service to a customer; this will be a decision made by the reporting entity in line with its risk-based systems and controls. 

AUSTRAC notes that the addition of Chapter 75 will have a positive impact on reporting entities, by providing greater comfort to reporting entities through guaranteeing protection from liability in legal proceedings. 

 

Search
Close this search box.
Search
Close this search box.

Logged in as

Most recent