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Issue 537, 26 May 2014 

In this issue:

 

ASIC derivative transaction reporting 

As you may be aware, under the ASIC Derivative Transaction Rules (Reporting) 2013, holders of an Australian Financial Services Licence (AFSL) – which includes most superannuation funds that deal in ‘over the counter’ (OTC) derivative products – are scheduled to commence reporting from 1 October 2014. 

Information on the reporting regime can be found on the ASIC website. 

Though the reporting rules are not new, ASFA, as well as other industry associations and large investment managers, have recently formed a working group with ASIC to identify industry issues associated with the reporting regime, and to liaise with ASIC in order to seek relief or waivers where they are appropriate. 

ASIC are now considering deferring and staggering the start date for Phase 3 reporting entities, due to delays in licencing a derivative trade repository. On 16 May 2014, ASIC released an explanatory note and draft exemption, and are seeking feedback on the proposed staggering arrangements by 6 June 2014. The explanatory note provides good background on the reporting regime. We have reviewed the draft exemption and support the deferral and staggering of the start date. 

The derivative transaction reporting regime is complex and will require detailed reporting to a licenced trade repository. Notwithstanding the fact that reporting can be, and most usually will be, delegated to third-party service providers (investment managers or asset administrators), it is essential that trustees broadly understand their obligations and commence discussions with their third-party service providers as soon as possible. It is likely that changes will need to be made to investment management agreements to cover the provision of this service. Risk-management controls will also need to be implemented to ensure delegated reporting is accurate and timely. Further, given that it will be a requirement to identify counterparties as part of the reporting, it is possible that consent may be needed from overseas counterparties who may be subject to bank secrecy and confidentiality laws. 

If a fund is not intending on delegating derivative transaction reporting, it is all the more important to commence planning immediately, and to commence discussions with ‘middleware’ suppliers and DTCC Data Repository (Singapore) PTE Ltd, the only trade repository currently seeking a licence to operate in Australia. 

If you have questions or concerns about OTC derivative trade reporting, or any comments on the draft relief instrument that you would like ASFA to raise with ASIC, please contact David Graus by close of business Monday 2 June 2014. 

 

Further ASIC guidance on MySuper product dashboards 

ASIC has issued further guidance to superannuation trustees about their obligation to produce a product dashboard for MySuper products. 

ASIC has reviewed a number of existing MySuper product dashboards, to ensure they provide useful and accessible information to members. This review was based on the dashboard requirements and measures set out in ASIC Information Sheet 170 MySuper product dashboard requirements for superannuation trustees (INFO 170). 

ASIC Commissioner Greg Tanzer said that while the review suggests that trustees have shown a good level of compliance with the dashboard requirements, there are some areas for improvement. In particular, ASIC expects that trustees will: 

Trustees may include additional information outside the product dashboard to assist users. Additional information may include, for example, the use of graphs, asset allocation charts, investment risk measures and a glossary of terms. In reviewing MySuper dashboards, ASIC observed that the additional information provided outside the parameters of the dashboard, but in close proximity to it, was in most instances helpful to a user in understanding the mandatory elements of the product dashboard. The overall impression formed from the mandatory elements and the optional disclosure around the dashboard should not be confusing, otherwise the trustee may be engaging in misleading or deceptive conduct. 

ASIC has reminded trustees that it is an offence for a trustee to fail to publish a product dashboard at all, or to publish a dashboard that is out of date, omits required information or otherwise is misleading or deceptive. Consistent with its facilitative compliance approach for super reforms until 1 July 2014, ASIC is adopting a measured approach where inadvertent breaches arise or systems changes are underway, provided industry participants are making reasonable efforts to comply. 

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