APRA is in line to get significantly increased powers of direction in respect of RSE licensees and their ‘controlled entities’ as part of the package of superannuation reforms announced in the Treasury Legislation Amendment (Improving Accountability and Member Outcomes in Superannuation) Bill 2017.

Australia’s market licensing regime has long been crying out for an overhaul, with regulatory guidance that largely dates back to the early 2000s struggling in the face of significant developments in financial markets since then. Fortunately, ASIC has taken heed and is due to release an updated market licensing regulatory guide this month. If the draft guidance is anything to go by, we should soon see a much more modern and flexible approach to market licensing.

The ASIC Enforcement Taskforce’s latest consultation paper pushes for a tougher penalty regime for corporate and financial sector misconduct, which has been key focus of the Taskforce’s Terms of Reference, and indeed of ASIC’s reform agenda for some time. Partner Belinda Thompson, Senior Associate Michela Agnoletti and Associate Katie Gardiner look at what the consultation paper proposes.

It’s been a busy few months for the development of the Asia Region Funds Passport. In late August, the Federal Government released exposure draft legislation to accommodate the introduction of the Passport in Australia. Once implemented, the Passport will allow fund managers from participating economies to market and sell interests in qualifying funds to retail investors in other passport jurisdictions within a streamlined regulatory framework. Partner Penny Nikoloudis, Senior Associate Rebecca Sheehy and Associate Mai Go report on the proposed multilateral regulatory framework for the Passport and some of the issues arising from the exposure draft legislation.

The FX Global Code was launched in Australia earlier this year and applies to ‘market participants’, including most financial institutions, bank asset managers, brokers and E-trading platforms. The Code sets out 55 best practice principles and, although compliance is voluntary, it is expected that these principles will become the standard for the FX market industry.

This afternoon, the Senate Standing Committee on Economics released their report on the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 (BEAR Bill). The Economics Committee recommends that the BEAR Bill be passed but recommends the commencement date be pushed out for 12 months from the date of enactment.

The commencement date of the BEAR legislation is fast approaching and institutions should start planning how to comply with the regime. We look at the changes made to the BEAR legislation following industry submissions, the timing for implementation and key steps to take.

Avid readers of Unravelled over the past few years cannot have failed to notice that there are moves afoot to introduce two new forms of collective investment vehicle, each promising a shiny, tax-neutral alternative to the unit trust and, hopefully, saving Australian lawyers a lot of sleepless nights and migraines attempting to explain the finer points of trust law to overseas counterparties and their advisers.

The Federal Court recently imposed a $1 million civil penalty on a licensee for breaches by its representatives of the best interests and appropriate advice duties. The penalties were the same amount that was agreed between ASIC and the licensee. The decision is a reminder to financial services licensees that they are responsible for their advisers’ advice and that ASIC can and will take enforcement action against licensees when it identifies breaches of personal advice duties. Partner Michelle Levy, Associate Katie Gardiner and Lawyer Jamil Diu report.

APRA this week released a discussion paper and draft prudential standards and practice guides. The standards and guides will apply to all RSE licensees from 1 January 2019. As Partner Michelle Levy and Senior Regulatory Counsel Michael Mathieson report, they will lead to significant changes across the superannuation industry.

Earlier today, ASIC released an updated version of Regulatory Guide 246, concerning conflicted remuneration and other banned benefits such as volume-based shelf-space fees. The changes are largely to address the life insurance remuneration reforms, which take effect on 1 January 2018. But there are other changes too, some of them reasonably significant. Partner Michelle Levy and Senior Regulatory Counsel Michael Mathieson report.

ASIC has released its report on financial advice provided by ‘vertically integrated institutions’, which is likely to be read with great interest by Commissioner Hayne and his team. Senior Regulatory Counsel Michael Mathieson and Partner Michelle Levy report.

After a gestation period roughly one-and-a-half times as long as that of an elephant, the proposed new design and distribution obligations for financial products, and intervention powers for ASIC, took their first, tentative steps yesterday, with the release of exposure draft legislation. The consultation period is not so long – you have until 9 February 2018 to make a submission. Senior Regulatory Counsel Michael Mathieson reports.

There has been a great deal of attention given to the meanings of ‘financial product advice’ and ‘personal advice’ in the Corporations Act and many of us are eagerly waiting to see what Justice Gleeson will say about the topic in the case ASIC has brought against the BT trustees. However, whatever Her Honour decides in that case, it is unlikely to help very much, because the line between general advice and personal advice will always turn on the facts and, where the facts change with each interaction with a customer or client, it will continue to be difficult for licensees to be confident that they and their representatives are not giving personal advice. While that is a pity, it is, in my view, a greater pity that more licensees are not prepared to take the plunge and give personal advice. If licensees assumed that their interactions with customers and clients about financial products was personal advice, the difference between general advice and personal advice would not matter much.

2017 was a busy year in superannuation. The Allens superannuation team takes stock of the legislative and regulatory reform proposals that have been mooted for 2018 and gazes into the crystal ball to see what might lie ahead this year.

The long-awaited Exposure Draft containing the tax treatment of the proposed new corporate collective investment vehicle (CCIV) was released for consultation on 20 December 2017. The CCIV is one of two main proposed solutions to the problem that offshore investors are dissuaded from investing in Australian funds because they do not understand unit trusts. The tax treatment of CCIVs will go a long way to determining their success.

The Parliamentary Joint Committee on Corporations and Financial Services has published its report on the life insurance industry. The report includes a nice summary of previous ‘inquiries, reviews, reforms and events’ since 2013. The Committee appears to think that all of these previous efforts have been more or less inadequate. Senior Regulatory Counsel Michael Mathieson reports.

As the ‘design and distribution’ obligations for issuers and distributors of financial products inch closer, there is a good deal of hand-wringing taking place. Much of it concerns what a target market determination should look like. Guidance from the European Securities and Markets Authority on MiFID II provides a sense of what local issuers may be in for. But first – Treasury’s proposal.

In the hurly burly of the Royal Commission’s recent hearings concerning financial advice, you may have missed some very important information about breach reporting by AFS licensees contained in the witness statement prepared by Mr Peter Kell, Deputy Chair of ASIC.

You would be hard pressed to find a bigger load of nonsense than the draft code of ethics for financial advisers issued recently by the Financial Adviser Standards and Ethics Authority.