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Issue 577, 28 July 2015 

In this issue: 


ASIC: urgent consultation on fee disclosure 

As members will be aware, ASIC has been undertaking a lengthy period of consultation on fee and cost disclosure in product disclosure statements (PDSs) and periodic statements. This has included the release of an extensive class order [CO 14/1252] and a draft updated version of Regulatory Guide 97: Disclosing fees and costs in PDSs and periodic statements (RG 97) (see ASFA Action issue 553 for details). 

ASIC has advised ASFA that it has made a number of revisions to draft RG 97 in response to submissions received from the industry, and has also developed a proposed class order that will make amendments to [CO 14/1252]. ASIC is now seeking very urgent feedback on these revisions and amendments. 

ASIC has advised that the proposed class order will make modifications to [CO 14/1252], including: 

ASIC has also indicated that the main revisions made to the regulatory guide include: 

ASFA has received approval from ASIC to make the proposed class order and the draft updated RG 97 available to members, with a view to providing feedback to ASIC as a matter of urgency. 

If you have any comments on the proposed class order or the draft updated RG 97 that you would like ASFA to consider including in a submission to ASIC, please forward them in writing to Fiona Galbraith by close of business Friday 31 July 2015. 

ASFA will be looking to convene a working group of interested members to discuss the feedback received on the proposed class order and draft updated RG 97, and to provide further input into its response to ASIC. This working group is likely to meet early to mid-next week. If you would like to be considered for inclusion in this working group (or would like to nominate a member of your organisation for inclusion), please email Fiona Galbraith by close of business Friday 31 July 2015. 


ASIC: new guidance on digital disclosures 

ASIC has released new regulatory guidance and relief to facilitate the provision of disclosures to financial services consumers through digital channels, and to encourage innovative communication of information about financial products and services. 

Importantly, the new releases explain ASIC’s view that providers do not need relief in most instances to use clients’ electronic addresses for delivery of disclosures. Relief provided via legislative instruments also creates a new default method of digital delivery, enabling financial services providers to publish a disclosure digitally and notify the client that it is available. 

The guidance and relief are contained in new Regulatory Guide 221 Facilitating digital financial services disclosure (RG 221) and two new legislative instruments: 

The changes follow recent consultation through Consultation Paper 224Facilitating electronic financial services and disclosures (CP 224) (see ASFA Action issue 551). 

ASIC’s media release indicates that it has facilitated the use of innovative digital disclosures by: 

ASIC Commissioner John Price said: 

“The changes mean product disclosure statements (PDS) and other financial services disclosure documents will be delivered to consumers digitally as the default option, unless the consumer opts out. This will reduce the costs of printing and mailing for businesses while preserving choice for those consumers who wish to receive paper. 

ASIC wants industry to harness the opportunities of digitisation and is encouraging the use of more engaging forms of communication using digital media – interactive, video and audio. This can boost consumer understanding of financial services and products.” 


APRA update on superannuation data reporting 

APRA has recently written to registrable superannuation entity (RSE) licensees, to provide guidance on a number of data reporting matters. 

Topics covered in the letter include: 

The letter is available on the APRA website. 


Capability review of ASIC 

The Assistant Treasurer, the Hon. Josh Frydenberg, has announced that the government is commissioning a review to consider the capabilities of ASIC. The review is intended to ensure that ASIC has the appropriate governance, capabilities and systems to meet their objectives and future regulatory challenges. 

This announcement forms part of the government’s response to the Financial System Inquiry (FSI), which recommended periodic reviews of the capabilities of financial regulators, commencing with a review of ASIC in 2015 to ensure it has the skills and culture to carry out its role effectively. Findings from the review will also provide information to assist the government’s consideration of the FSI recommendation for ASIC’s regulatory activities to be funded by the industry. 

The review will be led by an expert panel, which brings senior leadership experience from public and private sector roles, as well as an understanding and experience in industries regulated by ASIC. The expert panel will be supported by a team of public and private sector personnel, and will provide a final report to the government by the end of 2015. 

In undertaking the review, the expert panel will consult extensively with private sector businesses regulated by ASIC, peak bodies, regional and consumer representatives, as well as other stakeholders. 

The review may examine, and make recommendations on, how efficiently and effectively ASIC operates in achieving its strategic objectives, including: 


Disability lump sums: calculation of tax-free component 

The ATO has recently clarified its guidance on how RSE licensees should calculate the tax-free component when paying a superannuation disability lump sum. 

The taxable and tax-free components of a superannuation disability lump sum are calculated according to section 307-145 of the Income Tax Assessment Act 1997. Subsection 307-145(3) contains a formula that increases the tax-free component to broadly reflect the period where the relevant person would have expected to have been gainfully employed. 

The formula to calculate this disability lump sum benefit modification is: 

The ATO has indicated that any days that are included in both ‘service days’ and ‘days to retirement’ are to be counted only once in the formula’s denominator. The denominator is therefore equal to the number of days in the period from the start of the ‘service period’ for the disability lump sum to the person’s ‘last retirement day’. 

The ATO website has been updated to reflect this view. 


ASIC guidance: advice on self-managed superannuation funds 

ASIC has released two information sheets to improve the quality of advice provided by advisers on self-managed superannuation funds (SMSFs): 

The information sheets are intended to assist advisers comply with their conduct and disclosure obligations under the Corporations Act 2001, and outline what ASIC looks at when undertaking surveillance in this area. The sheets specify the types of risks and costs that an adviser should consider, discuss and then disclose to clients when providing advice on establishing or switching to an SMSF. 

The information sheets also deal with the cost-effectiveness of an SMSF, making clear ASIC’s view that an SMSF with a starting balance of $200,000 or below is unlikely to be in the client’s best interests, and that advice to establish one below that threshold is more likely to be scrutinised by ASIC. 

ASIC’s media release and the information sheets are available on the ASIC website. 


ASFA member survey 

Last week, Pauline Vamos invited ASFA members to complete a brief online survey in regard to their views on ASFA and ASFA services. 

The response has been strong, with close to 400 surveys now completed, and comments noted. 

To ensure ASFA receives a true representation of the views of its members, more responses are welcome. 

The survey can be found by following the link, and will only take a few minutes to complete. 


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