Financial Services Thinking
Issue 15, July 2021
This edition of Financial Services Thinking highlights the latest news from the corporate regulators plus important industry developments. We also share a 'hot tip' about the 5 October 2021 start date for the Design and Distribution Obligations.
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ASIC guidance on ongoing fee arrangements for financial advisers and advice licensees
ASIC has released information sheet INFO 256 to clarify the obligations financial advisers and advice licensees must satisfy when charging fees to provide personal advice to retail clients.
The financial advice industry’s response to the recent ASIC Consultations, including Consultation Paper 332 Promoting access to affordable advice for consumers, confirms a demand for short, simpler, and more user-friendly regulatory guidance from ASIC. As a result, Regulatory Guide 245 Fee disclosure statements will be withdrawn and replaced by INFO 256.
Regulatory Guide 175 Licensing: Financial Product Advisers-Conduct and Disclosure (RG 175) has also been amended to reflect the new advice obligations introduced into the Corporations Act.
We strongly encourage financial advisers and advice licensees to familiarise themselves with INFO 256 and the amendments to RG 175. If you have any questions about your obligations, please contact a member of our Funds Management team.
Transitional relief extended for foreign financial services providers
ASIC is extending the transitional relief for foreign financial services providers (FFSPs) from the requirement to hold an AFSL by 12 months (to 31 March 2023), pending the outcome of the Australian Government's consultation about the regulation of FFSPs. This was announced as part of the Federal Budget.
The Government announced it will consult on options to:
- restore regulatory relief from the requirement to hold an AFSL for FFSPs who are licensed and regulated in jurisdictions with comparable financial service rules and obligations, or have limited connection to Australia
- create a fast-track licensing process for FFSPs who wish to establish more permanent operations in Australia.
(Click here for our most recent article.)
Our Funds Management lawyers are up to date with these developments and can help with your queries.
Ceasing the use of LIBOR in new contracts before the end of 2021
The Financial Stability Board (FSB) recently announced that the use of the London Interbank Offered Rate (LIBOR) benchmarks in new contracts should cease as soon as practicable and no later than any timelines set by relevant authorities.
While some USD LIBORS will continue until mid-2023, the US Banking Supervisors have requested that, in any event, new contracts are to cease using USD LIBOR as a reference rate by no later than 31 December 2021.
Regulators such as ASIC and APRA, as well as the RBA, support the expectations set by the FSB and US Banking Supervisors. ASIC, APRA, and the RBA expect all market participants to stop issuing LIBOR-referenced contracts by the end of 2021, and promptly commence conversion of legacy LIBOR contracts.
You can access more information about the announcements and the Global Transition Roadmap for LIBOR here.
ASIC removes regulatory barrier for offshore market participants
Responsible entities which are issuers of exchange traded funds (ETFs) quoted on the financial market operated by ASX Limited or Chi-X Australia Pty Ltd can restrict fund withdrawals to authorised participants only and provide index or portfolio information to authorised participants before the information is provided to other members (equal treatment relief).
ASIC has amended its class order on ETFs to remove the requirement for an authorised participant to be an Australian resident for tax purposes.
This amendment aims to encourage new entrants, such as offshore market-making entities, to participate in the Australian ETF market and, as a result, promote competition and market efficiency.
ASIC has issued several scam alerts for fake investment opportunities and ASIC endorsements.
Scammers are reaching out via cold call, email, or comparison websites to promote fake Telstra bonds offered on the ASX. These bonds are falsely said to be associated with USB and ING Bank.
Fake Qantas bonds are also being promoted by scammers under the guise of legitimate bonds being offered by Equity Trustees Limited.
ASIC is aware some websites are displaying or linking fake ASIC company registration certificates and other documents that have illegitimately used ASIC’s logo. Recent examples of having used fake ASIC company documents include Global Capital Swiss Corp, COIN POBIT, and A Glance Group LLC.
Consumers should conduct their own checks and inquiries, especially before responding to any unsolicited investment opportunities. You can read more about these warnings on the ASIC website.
Consultation on proposed amendments to the ASIC market integrity rules
ASIC has released Consultation Paper 342 Proposed amendments to the ASIC market integrity rules and other ASIC-made rules seeking feedback on proposed amendments to the ASIC Market Integrity Rules (Securities Markets), ASIC Market Integrity Rules (Futures Markets), and the Corporations Act.
The proposed amendments set out to reduce the regulatory burden on participants, simplify rules across rule books, and remove ambiguity in the current drafting.
Those interested in providing feedback on the proposals must do so by 6 August 2021.
Consultation on crypto-assets as underlying assets for ETPs and other investment products
ASIC has also released Consultation Paper 343 Crypto-assets as underlying assets for ETPs and other investment products concerning exchange-traded products (ETPs), listed investment companies, listed investment trusts and unlisted registered managed investment schemes that provide retail investors with exposure to crypto-assets. The paper sets out key areas of focus for market operators and issuers to strengthen good practices in respect of pricing, custody, risk management and disclosure.
Interested parties must make submissions by 27 July 2021.
ASX launches real-time corporate actions straight-through processing service
ASX’s straight-through processing (STP) service enables processing and delivery of critical information within seconds of announcement using ISO 20022 global standard messaging.
The STP service allows users to complete smart online forms to make an announcement. Before the announcement is released, validations are automatically performed to check compliance with ASX listing rules and minimum global data and format standards.
ASX says this means investors will get more accurate and comprehensive data faster and in a compliant format.
Cases and legislation
ASIC’s product intervention power survives first test
ASIC's use of its product intervention power survived its first real test when it was upheld in a decision of the Full Federal Court on 29 June 2021. This is the latest in the long running litigation between ASIC and Cigno Pty Ltd, an entity involved in providing short term credit to retail clients.
In our recent Alert, partner Selina Nutley and consultant Jeunesse Meldrum discuss this decision in detail along with the relevance of the Design and Distribution Obligations (DDO).
Our lawyers can answer your questions about how the product intervention power and DDO impact your business.
ASIC firm on DDO start date
Some of our clients have been asked by platform operators to submit close to final Target Market Determinations (TMDs) for their retail funds for review by the platforms in advance of the Design and Distribution Obligations (DDO) start date on 5 October 2021. ASIC has confirmed it does not intend to push out this start date. While not all fund managers are members of the Financial Services Council (FSC), it seems many platforms will expect managers to follow the FSC TMD template which will ensure a standard approach. Our Funds Team can draft or review your TMDs and answer your questions about DDO.
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