Issue 606, 24 August 2016
In this issue:
- Fee and cost disclosure: ASIC compliance approach and industry engagement
- Productivity Commission study on efficiency and competition: request for input
- ‘Dollar disclosure’ provisions: ASIC relief
- QROPS: advice from HMRC
Fee and cost disclosure: ASIC compliance approach and industry engagement
ASIC has recently indicated its compliance approach toward amendments to fee and cost disclosure requirements for superannuation products due to apply from 1 February 2017.
Under amendments to the Corporations Regulations 2001 made by ASIC Class Order [CO 14/1252], new fee and cost disclosure requirements for superannuation products will apply to Product Disclosure Statements (PDSs) from 1 February 2017, and to periodic statements that are required to be given from 1 January 2018 onwards.
In a recent speech, ASIC Commissioner, Greg Tanzer has given an indication of ASIC’s intended compliance approach once the new requirements have commenced (our emphasis):
“We generally expect that the level of disclosed fees and costs may increase as issuers’ disclosure of fees and costs becomes more accurate and more consistent. We think that this is [sic] would be appropriate as it means that investors are being better informed about the level of fees and costs that they are charged.
After the transition period, we expect to undertake compliance reviews to check how well issuers are complying with the disclosure requirements. In the first few months, up to 30 June 2017, we will take a facilitative approach. During this period, ASIC will take a measured approach should errors be identified in compliance with the requirements. This is provided if there is evidence that the issuer has acted in good faith to attempt to comply. At the same time, if we identified deliberate gaming of the disclosure requirements, we will take the appropriate enforcement action, including issuing stop orders and media release naming the issuer and reasons for the stop order.”
ASFA, along with other industry bodies, has been participating in an ongoing process of engagement with ASIC to address issues arising out of the requirements specified in the Class Order as well as guidance outlined in ASIC’s updated Regulatory Guide RG 97 Disclosing fees and costs in PDSs and periodic statements.
The next stage of the process is for the industry bodies to jointly submit proposed frequently asked questions (FAQs) to ASIC, who will consider preparing responses for publication. ASIC has indicated that it is important that the questions are genuinely frequently asked and are not already answered by RG 97. Please contact Fiona Galbraith or Julian Cabarrus with any feedback or proposed FAQs.
Productivity Commission study on efficiency and competition: request for input
The Productivity Commission’s draft report on the efficiency and competitiveness of the system has the potential to shape the future of the superannuation industry for decades to come. ASFA has formed working groups to address key elements of the Productivity Commission draft report in respect of:
- objectives, criteria and indicators
- data requirements
- insurance.
The first two working groups met on Thursday 18 and Friday 19 August respectively, with insurance scheduled to meet on Wednesday 24 August.
If you have any feedback or input on the questions raised in the Productivity Commission report, please contact Fiona Galbraith or Andrew Craston by close of business Wednesday 31 August 2016.
‘Dollar disclosure’ provisions: ASIC relief
ASIC has issued a new legislative instrument continuing relief from the ‘dollar disclosure’ provisions in the Corporations Regulations 2001, previously provided under class orders that were due to sunset (expire) shortly.
The dollar disclosure provisions in the Act require various costs, fees, charges, expenses, benefits and interests to be stated as amounts in dollars in statements of advice, product disclosure statements and periodic statements (including exit statements), except where ASIC has provided relief.
The provisions are designed to help consumers better understand information about costs, fees, charges, expenses, benefits and interests by expressly requiring certain information to be presented in dollar terms. However, there are a number of situations in which ASIC considers that, for compelling reasons, compliance with the law would be impossible, unreasonably burdensome (including within a specified period) or not in the interests of clients in certain circumstances.
ASIC has previously provided conditional class order relief in relation to the required mode of presentation of information, via class orders:
- [CO 04/1431] Dollar disclosure: Cost of derivatives, foreign exchange contracts, general insurance products and life risk insurance products
- [CO 04/1433] Dollar disclosure: Non-monetary benefits and interests
- [CO 04/1435] Dollar disclosure: Amounts denominated in a foreign currency.
Following a review, ASIC has decided to extend the operation of these class orders, by making the ASIC Corporations (Disclosure in Dollars) Instrument 2016/767, along with ASIC Corporations (Repeal) Instrument 2016/768, which repeals the existing Class Orders.
ASIC has also considered the relief provided by [CO 04/1430] Dollar disclosure: Unknown facts or circumstances, and decided that it has limited use and does not form a necessary and useful part of the regulatory framework. As a result, [CO 04/1430] has been repealed by Instrument 2016/768 and the relief it provided will not be continued.
QROPS: advice from HMRC
There have been some recent developments in relation to changes to the UK’s laws around Qualifying Recognised Overseas Pension Scheme (QROPS) which have affected some Australian superannuation funds (refer ASFA Action issue 590 for background).
Recent letters regarding transfers between 6 April 2015 and 30 June 2015
A number of funds have received letters from Her Majesty’s Revenue and Customs (HMRC) advising that they will not be pursuing the tax charges that arise on the individuals who transferred UK tax-relieved pension savings between 6 April 2015 and 1 July 2015 to the superannuation fund after it was no longer a QROPS. ASFA enquired as to whether this relief was a general position or whether each affected fund needed to have applied for relief on a case-by-case basis.
HMRC advised that a scheme manager (trustee) must notify HMRC that their scheme has ceased to be a QROPS within 30 days, beginning with the date that the scheme ceased to be a QROPS.
These letters have been sent to schemes that had contacted HMRC that they no longer met the conditions to be QROPS, following the introduction of the pensions age test on 6 April 2015, and the decisions not to pursue tax charges on transfers made between 6 April 2015 and 1 July 2015 were based on the specific facts and circumstances of those particular cases.
Successor fund transfers (SFT)
There are a handful of (former QROPS) superannuation funds who are looking to progress a Successor Fund Transfer (SFT). Given that Australian (non-public sector or SMSF) funds have lost their QROPS status, this represents a barrier to completing a SFT out of a former QROPs fund.
ASFA enquired about the possibility of HMRC recognising that SFTs are materially different, and distinct from, member initiated rollover requests. We also enquired about providing relief with respect to a former QROPS fund transferring the benefits of affected (QROPS transfer) members to a successor fund as part of a SFT.
HMRC has responded that it must apply the law correctly and cannot choose to move away from this position merely because the result seems unfair or unreasonable. Any discretion can only be made on a case-by-case basis and will depend on the facts and circumstances of each individual case as they arise. It cannot be applied generally, for example to a particular type of transaction or transfer such as a SFT. Accordingly, this will mean that affected funds will need to apply to HMRC directly for relief.
