Australia: Superannuation, Funds Management & Financial Services News – 15 August 2018

Last Updated: 17 August 2018
Article by Chris Lovell, Paul Faure, Bill Glover and Kylie Wilson

Most Read Contributor in Australia, September 2018

In the media

RC focuses on vertical integration and super
Vertically-integrated structures and their impact on bank-owned superannuation structures have been heavily scrutinised in hearings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (09 August 2018). More...

ASIC sees weakness in super insurance code
ASIC notes that, at present, there are significant weaknesses in the current Insurance in Superannuation Voluntary Code of Practice, including around its monitoring and enforcement, that limit is potential effectiveness (09 August 2018). More...

ASIC raises absence of 'best interests' obligation for employers
Employers are not required to act in employees' best interests when selecting a default superannuation fund and this creates an environment where conflicts arise, according to the ASIC (09 August 2018). More...

Turnbull Government expands ASIC's armoury
The Turnbull Government is injecting a further $70.1 million into the ASIC to ensure the corporate regulator has the resources and powers it needs to combat misconduct in the financial services industry and across all corporations for the protection of Australian consumers (07 August 2018). More...

Update on financial advice institutions' fees for no service refund programs
AMP, ANZ, CBA, NAB and Westpac have now paid or offered customers $222.3 million in refunds and interest for failing to provide advice to customers while charging them ongoing advice fees. In addition, ASIC is overseeing FFNS remediation programs by other Australian financial services (AFS) licensees that have identified potential FFNS failings (07 August 2018). More...

APRA releases submission to the Productivity Commission's draft report into superannuation
APRA – APRA releases submission to the Productivity Commission's draft report into superannuation (03 August 2018).

Give the ACCC a competition mandate: Productivity Commission
The Productivity Commission has released its final inquiry report into Competition in the Australian Financial System, recommending the ACCC be given an explicit mandate to monitor competition in the financial system (06 August 2018). More...

Royal commission shows no need to water down company laws, say lawyers
The banking royal commission has shown that Australia should not water down its continuous disclosure regime to make it easier for listed companies to avoid class actions, according to the country's biggest class action outfit (01 August 2018). More...

Professional standards reforms for financial advisers - ASIC update
ASIC has announced changes to reporting dates for a number of required notifications in the transition to the new financial adviser professional standards reforms. The revised schedule is intended to simplify licensees' disclosure obligations (01 August 2018). More...

ASIC updates guidance for funds management industry
ASIC has released a suite of seven new and updated regulatory guides to provide comprehensive guidance to the funds management industry. The guidance has been updated for changes arising from the Asia Region Funds Passport (31 July 2018). More...

In practice and courts

New financial adviser professional standards reforms
The revised schedule is intended to simplify licensees' disclosure obligations. ASIC is also clarifying the process for recognising advisers as 'existing providers'.
Existing providers
Financial advisers who are listed on the Financial Advisers Register (FAR) between 1 January 2016 and 1 January 2019 will be recognised as an 'existing provider' under the new professional standards. If a person is an 'existing provider', they have until 1 January 2021 to pass the exam, and 1 January 2024 to complete an approved qualification. In the meantime, they can continue to work as a financial adviser.
Changes to FAR notifications
A key change is that ASIC will push back the timing for licensees to notify of new advisers who are joining the industry for the first time after 1 January 2019. As a result, new 'provisional relevant providers' can only be added to FAR from 15 November 2019. Further information about the changes to notification dates can be found on ASIC's Professional standards for financial advisers – reforms website (01 August 2018).

Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 [Provisions]
Status: Submissions Closed. Date Referred: 21 June 2018 Reporting Date: 13 August 2018. More...

APRA proposes updates to related parties framework for ADIs
APRA's proposals to modernise the framework include: explicitly addressing 'step-in risk' by incorporating guidance from the Basel Committee on Banking Supervision. A three-month consultation period on the proposed revisions to APS 222 and ARS 222.0 has now commenced, with APRA accepting submissions until 28 September 2018. Copies of the discussion paper are available here.

Draft amendments to Chapters 4 and 15 of the AML/CTF Rules
These amendments exempt reporting entities from certain identification requirements in Chapter 4 and Chapter 15 of the AML/CTF Rules, for customers that are 'custodians'. The definition of 'custodian' in new paragraph 4.4.19(1) limits the exemption to corporate custodians, rather than individuals who provide custodial or depository services. The second public consultation period for these amendments closed on 31 July 2018. More...

ASIC consultation: foreign financial services providers relief proposals
CP 301 sets out a proposal to enable foreign providers to apply for a modified form of Australian financial services (AFS) licence (foreign AFS licence). This follows ASIC's review of the regulatory settings behind our foreign providers relief. The current foreign provider licensing relief due to sunset on 27 September 2018, will be extended until 30 September 2019 while we consult with stakeholders.

APRA: Review of the superannuation prudential framework
The aim of the review is to ensure the prudential and reporting standards, and related guidance, have achieved their objectives and continue to remain fit for purpose. To commence this review, APRA released the first of a series of consultation papers on aspects of the prudential framework. APRA invites written submissions on all consultation papers by 26 September 2018. Copies of the consultation papers are available on APRA's website.

AIST Statement on the Royal Commission
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry begins its Round Five hearings (6 August 2018). More...

ASFA Submissions
Submission to the Australian Financial Complaints Authority (AFCA)
ASFA response to the AFCA Funding Consultation Paper (31 July 2018). More...

Cases

Australian Securities and Investments Commission v Linchpin Capital Group Ltd [2018] FCA 1104
CORPORATIONS – managed investment scheme – ASIC application to appoint receivers – nature and extent of contraventions – scope of assets over which receiver appointed.
Australian Financial Services Reform Act 2001 (Cth); Australian Securities and Investments Commission Act 2001 (Cth); Corporations Act 2001 (Cth); Personal Property and Securities Act 2009 (Cth).
Held: Again, save for ASIC's concession which I apprehend is appropriately given so as to prevent loss being suffered by other persons, I would have been prepared to grant the injunctions preventing Endeavour from engaging in the provision of all financial services.

Aussiegolfa Pty Ltd (Trustee) v Commissioner of Taxation [2018] FCAFC 122
SUPERANNUATION – in-house asset rules – self-managed superannuation fund – where a self-managed superannuation fund acquired units of a particular class in a managed investment scheme – where the units were referred to as units in a sub-fund – where a particular property was acquired by the responsible entity of the managed investment scheme on behalf of the class of unit holders – whether the units held by the trustee of the self-managed superannuation fund constituted an investment in a "related trust" so as to constitute an in-house asset – whether there was a distinct trust associated with the class of units.
TRUSTS – definition of a trust – managed investment scheme – where the constitution of a managed investment scheme conferred on the responsible entity a power to create classes of units and to determine the rights, obligations and restrictions attaching to units in the class – where the responsible entity created a class of units associated with (what was referred to as) a sub-fund – where a particular property was acquired by the responsible entity on behalf of the class of unit holders – where the product disclosure statement stated that the assets of one sub-fund were not available to satisfy liabilities of another sub-fund and that an investor would acquire a beneficial interest in the underlying property held by the sub-fund – whether statements in product disclosure statement could be relied on as secondary evidence of a determination by the responsible entity – whether there was a distinct trust associated with the class of units.
SUPERANNUATION – sole purpose test – self-managed superannuation fund – where self-managed superannuation fund acquired units of a particular class in a managed investment scheme – where the responsible entity acquired a property, being an apartment in a student accommodation complex, on behalf of the class of unit holders – where the custodian of the managed investment scheme entered into a leasing and managing authority with a student housing entity – whether leasing the apartment to the daughter of the sole member of the self-managed superannuation fund at market rent would cause the fund to breach the sole purpose test.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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