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This section contains our 2010-2011 news updates. For 2000-2009 news updates, please see our Archive.

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ASIC releases investor guide and disclosure guidance for agribusiness schemes
30 January 2012

ASIC today released an investor guide and regulatory guidance with new disclosure benchmarks and principles for agribusiness managed investment schemes to improve investor awareness of the risks associated with these products.

These risks have been highlighted since 2008 when several operators of agribusiness schemes failed, causing investors significant losses. The collapses highlighted features of agribusiness schemes and raised concerns about whether these features and associated risks were adequately disclosed to investors.

Regulatory Guide 232 Agribusiness managed investment schemes: Improving disclosure for retail investors (RG 232) outlines five benchmarks and five disclosure principles that apply to all agribusiness schemes.

RG 232 is the latest in the series of ‘if not, why not’ disclosure benchmarks for sectors that pose particular risk to investors and financial consumers. It follows the issue of disclosure benchmarks for the infrastructure and over-the-counter contracts for difference sectors in Regulatory Guide 231 Infrastructure entities: improving disclosure for retail investors (RG 231) and Regulatory Guide 227 Over-the-counter contracts for difference: Improving disclosure for retail investors (RG 227).

Agribusiness schemes must disclose whether they meet the benchmarks and if not, why not. ‘Why not’ means explaining how they will deal with the business factor or the issue underlying the benchmark.

Agribusiness schemes pose particular risks because unlike many other types of managed investment schemes, they don’t generally use a traditional unit trust structure. For tax reasons, many agribusiness schemes are structured so that investors operate their agribusiness investment in their own right. Investors enter into contracts with the responsible entity or other parties to perform all the cultivation and management activities associated with the investor’s agribusiness enterprise. Investors need to understand these complex arrangements as an investment in an agribusiness scheme is a long-term commitment and investors may have ongoing obligations in relation to the operation of their agribusiness enterprise.

RG 232 also outlines the standards ASIC expects responsible entities to meet when advertising agribusiness schemes to retail investors and guidance as to clear, concise and effective disclosure of the benchmark and disclosure principle information.

Responsible entities of agribusiness schemes should disclose the benchmark and disclosure principle information in any product disclosure statement dated on or after 1 August 2012.

For further information (and to access the relevant documents), refer to ASIC's website.

ASIC releases disclosure guidelines for infrastructure entities
24 January 2012

ASIC today released new disclosure benchmarks and principles for infrastructure entities to improve investor awareness of the risks associated with investing in these products.

Regulatory Guide 231 Infrastructure entities: Improving disclosure for retail investors (RG 231) outlines nine benchmarks and eleven disclosure principles that apply to infrastructure entities, aimed at addressing the risks peculiar to infrastructure entities.

Infrastructure entities must disclose whether they meet the benchmarks and if not, why not. 'Why not' means explaining how a responsible entity deals with the business factor or the issue underlying the benchmark. The benchmarks relate to topics such as corporate structure and management, remuneration of management, classes of units and shares, substantial related party transactions, cash flow forecast, base-case financial model, performance and forecast, distributions and updating the unit price.

Infrastructure entities are also required to disclose against 11 disclosure principles addressing key relationships, management and performance fees, related party transactions, financial ratios, capital expenditure and debt maturities, foreign exchange and interest rate hedging, base-case financial model, valuations, distribution policy, withdrawal policy, and portfolio diversification.

In addition to the benchmarks and disclosure principles, RG 231 also outlines the standards ASIC expects responsible entities to meet when advertising infrastructure entities to retail investors. These standards are consistent with draft guidelines for the advertising of financial products and financial advice, released in November 2011.

Responsible entities of infrastructure entities must disclose the benchmark and disclosure principle information in any existing and new disclosure dated on or after 1 July 2012.

ASIC has also published an investor guide for retail investors and financial consumers on the MoneySmart website to provide more information about this product class.

For further information (and to access the relevant documents), refer to ASIC's website.

ASIC's plans for FOFA reforms
13 December 2011

ASIC today released its plans for publishing regulatory guidance on the impact of the Future of Financial Advice (FOFA) reforms on financial advisers and other industry participants.

The proposed commencement date of the FOFA reforms is 1 July 2012. This depends on the timing of the passage of the Corporations Amendment (Future of Financial Advice) Bill 2011 and the Corporations Amendment (Further Future of Financial Advice Measures) Bill 2011 (FOFA Bills) through the Australian Parliament.

Assuming the FOFA Bills are passed before 1 July 2012, ASIC aims to release regulatory guidance before 1 July 2012 on:

• The best interests duty: guidance will set out ASIC's expectations for meeting the best interests duty.
• Scaled advice: ASIC issued Consultation Paper 164 Additional guidance about how to scale advice in July 2011. The final guidance will aim to increase access to advice by facilitating the provision of scaled advice where appropriate. This guidance will take into account the best interests duty and will discuss a range of topics, including how the fact find can be either limited or expanded, depending on the complexity of the advice being provided.
• Conflicted remuneration: guidance will assist industry to understand the practical operation of the ban on conflicted remuneration and how ASIC will administer it.
• ASIC powers: ASIC will re-issue Regulatory Guide 98 Licensing; Administrative action against financial services providers to reflect its expanded powers to cancel or suspend an AFS licence and ban representatives.

ASIC is also considering developing regulatory guidance on FOFA's anti-avoidance provisions.

Finally, ASIC will amend existing regulatory guidance and ASIC relief to reflect the FOFA reforms where necessary. These consequential amendments to existing regulatory guidance may not all occur before 1 July 2012.

ASIC will consult directly with stakeholders in the coming months as well as seeking industry feedback through its usual formal consultation process.

ASIC will also adopt a facilitative compliance approach for the first 12 months of the implementation of the FOFA reforms, until 1 July 2013. That is, provided industry participants are making reasonable efforts to comply with the FOFA reforms, ASIC will adopt a measured approach where inadvertent breaches result from a misunderstanding of requirements or systems issues. However, where ASIC finds deliberate and systemic breaches it will take stronger regulatory action.

For further details refer to the ASIC website. (For background on the FOFA reforms, refer to our Breaking News for 26 April 2010, 29 August 2011 and 28 September 2011.)

ASIC releases new financial requirements for responsible entities
7 November 2011

ASIC today released new financial requirements for responsible entities (REs) of managed investment schemes (MISs).

The changes, implemented through Class Order (CO 11/1140) and outlined in updated versions of Regulatory Guide 166 Licensing: Financial requirements (RG 166) and Pro Forma 209 Australian financial services licence conditions (PF 209), aim to ensure REs have adequate resources to meet operating costs and there is appropriate alignment with the interests of investors.

Under the changes – which are the first significant changes in more than a decade to the rules covering financial requirements for MISs – REs must prepare 12-month cash-flow projections which must be approved at least quarterly by directors.

To meet the new net tangible asset (NTA) capital requirements, REs must hold the greater of:

• $150,000
• 0.5 per cent of the average value of scheme property (capped at $5 million), or
• 10 per cent of the average RE revenue (uncapped).

A liquidity requirement has also been introduced where an RE must hold at least 50 per cent of its NTA requirement in cash or cash equivalents, and an amount equal to the NTA requirement in liquid assets.

The updated versions of RG 166 and PF 209 are appendices to Report 259 Response to submissions on CP 140 Responsible entities: Financial requirements (REP 259).

ASIC is giving existing REs until 1 November 2012 to comply with the new financial requirements.

For further details (including to access Report 259 Response to submissions on CP 140 Responsible entities: Financial requirements and the appendices) refer to the ASIC website.

Government releases exposure draft of second tranche of FoFA amendments
28 September 2011

The Government has today released for comment the second (and final) tranche of draft legislation on the FOFA reforms, the Corporations Amendment (Further Future of Financial Advice Measures) Bill 2011. The legislation, which supplements the first tranche released for comment in August, contains provisions relating to conflicted remuneration, including the ban on commissions and other volume-based payments to financial advisers, and bans on soft-dollar benefits to financial advisers, volume-based shelf-space fees to product platforms, and asset-based fees involving leverage.

The closing date for submissions is 19 October.

For further details (including to access the draft Bill and explanatory memorandum), refer to the Government's FoFA site. (For background on the FoFA reforms, refer to our Breaking News for 26 April 2010 and 29 August 2011.)

ASIC releases new advertising guidelines
30 August 2011

ASIC today released a consultation paper and draft regulatory guide containing best practice guidance for the advertising of financial products and financial advice.

The guide seeks to promote confident and informed investors and financial consumers, noting the important role that advertising can play in helping investors to make important financial decisions.

ASIC's guidance also contains real examples of where ASIC has raised concerns with promoters of financial products or services and as a result their advertisement has been changed.

Comments on the consultation paper and draft regulatory guide are due by 25 October 2011.

For further details (including to access CP 167 Advertising financial products and advice services: Good practice guidance) refer to the ASIC website.

Future of Financial Advice Reforms – Draft Legislation
29 August 2011

The Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, today released the first tranche of draft legislation of the Future of Financial Advice (FOFA) reforms for public consultation.

The first tranche of the draft Bill covers a number of key components of the FOFA reforms, including opt-in, the best interest duty and the increase in ASIC's powers to enforce the new elements of these reforms.

The second tranche (which is expected to be released for public consultation shortly) will include the ban on conflicted remuneration (covering commissions and volume payments), the ban on 'soft dollar' benefits, the ban on asset-based fees (where there is gearing), and the definition of intra-fund advice. Mr Shorten will also be announcing at this time his decision on the replacement of the accountants' exemption.

The best interest duty requires financial planners and advisers to act in the best interests of the client, and to give priority to the interests of the client in the event of conflict between the interests of the client and the interests of the individual providing the advice, or their employer.

The 'opt-in' measure requires a financial adviser or planner to send a renewal ('opt-in') notice every two years to new clients, as well as an annual fee disclosure statement to all clients. There will be significant flexibility in terms of how advisers are able to discharge the opt-in obligation.

The extension of ASIC's powers will give the regulator the capacity to act at an earlier stage if it has concerns about individuals or a licensee. For example, it enables the Commission to ban a person who is not of good fame and character or not adequately trained or competent to provide financial services (in essence they are not a fit and proper person).

The ban on risk insurance commissions will apply to commissions on group life insurance in all superannuation products, and to commissions on any life insurance policies in a default or MySuper product from 1 July 2013.

The closing date for submissions on the draft legislation is Friday, 16 September 2011.

For further detail (including to access a copy of the exposure draft and explanatory memorandum) refer to the Treasury website (http://www.treasury.gov.au). (For background information on the FOFA reforms, refer to our Breaking News for 26 April 2010 and 28 April 2011.)

Extension of transition period for shorter PDS regime
21 June 2011

ASIC has announced its intention to extend the transition period for the shorter product disclosure statement (PDS) regime for superannuation and simple managed investment schemes.

On 8 June 2011, the Federal Government announced its plan to make refinements to the shorter PDS regime. These proposed refinements will allow providers of these regulated products to:

• remain in the old regime until 22 June 2012;
• continue to issue supplementary PDSs until 22 June 2012;
• opt into the new regime from 22 June 2011 if they are ready to.

Class Order CO 11/576 gives effect to this proposal on an interim basis. This is to allow time for the Federal Government to implement the refinements to the shorter PDS regime it previously announced, and to avoid any interim disruption that could adversely impact retail investors and providers of superannuation and simple managed investment scheme products.

The Federal Government's announcement also included a number of other changes to clarify or refine the operation of the shorter PDS regime. These refinements include:

• changes to confirm that pure risk products are excluded from the regime (irrespective of whether they are provided through a superannuation fund or not);
• changes to clarify that combined defined benefit and accumulation products are included in the regime;
• amending the regulations to allow for situations where applications are electronically lodged.

CO 11/576 does not give effect to these proposed changes.

For further details (including to access CO 11/576), refer to the ASIC website. (For background information, refer to our Breaking News for 8 June 2011.)

Retail investors and financial service providers will find changing to new PDS easier
8 June 2011

Following changes announced today by Assistant Treasurer Bill Shorten, financial services providers will find it easier to change to the new Product Disclosure Statement (PDS) regime in June 2012.

From 22 June 2012, PDSs for all superannuation products and simple managed investment schemes regulated by the Corporations Act 2001 must be eight pages in length, and meet new content requirements that have been redesigned following consumer testing.

Transitional arrangements will apply between 22 June 2011 and 22 July 2012.

To provide more time for providers to put processes in place, and flexibility for others who are well advanced, the following changes are being made. These changes will allow providers of these regulated products to:

• remain in the old regime until 22 June 2012
• continue to issue supplementary PDSs until 22 June 2012
• opt into the new regime from 22 June 2011 if they are ready to.

Consistent with the Government's existing policy in relation to shorter disclosure, a number of other changes are also being made, to clarify or refine the operation of the requirements. These refinements include:

• changes to confirm that pure risk products are excluded from the regime (irrespective of whether they are provided through a superannuation fund or not)
• changes to clarify that combined defined benefit and accumulation products are included in the regime
• amending the regulations to allow for situations where applications are electronically lodged.

Draft regulations for these amendments will be available shortly for public comment.

These refinements will start as soon as possible. Where necessary, providers can approach ASIC for appropriate interim relief.

Further changes to apply the shorter disclosure requirements to areas such as platforms and multi-funds are not currently contemplated by the Government.

For further detail refer to the Treasury website (http://www.treasury.gov.au).

Government announces further details for future of financial advice reforms
28 April 2011

The Government has today announced, with the release of an information pack, more details regarding the Future of Financial Advice (FOFA) reforms. Today's announcement provides further information on those areas that the Government had previously indicated would require additional consultation, as well as providing more details about how the reforms announced last April will operate.

In summary, the new elements of the FOFA reforms announced today are:

• a prospective ban on up-front and trailing commissions (and similar payments) for both individual and group risk within superannuation from 1 July 2013
• a prospective requirement for advisers to get clients to opt-in (or renew) their advice agreement every two years from 1 July 2012
• a prospective ban on any form of payment relating to volume or sales targets from any financial services business to dealer groups, authorised representatives or advisers, including volume rebates from platform providers to dealer groups
• a prospective ban on soft dollar benefits, where a benefit is $300 or more (per benefit) from 1 July 2012 – the ban does not apply to any benefit provided for the purposes of professional development and administrative IT services if set criteria are met
• expanding a new form of limited advice called scaled advice, which can be provided by a range of advice providers, including superannuation trustees, financial planners and potentially accountants, creating a level playing field for people who provide advice. Scaled advice is advice about one area of an investor's needs, such as insurance, or about a limited range of issues
• a limited carve-out from elements of the ban on conflicted remuneration and best interests duty for basic banking products where employees of an ADI are advising on and selling their employer ADI's basic banking products. Basic banking products are basic deposit products (eg, savings accounts), first home saver account deposit accounts and non-cash payment products (eg, travellers cheques and cheque accounts)

The Government will also explore whether the term 'financial planner/adviser' should be restricted under the Corporations Act 2001.

The Government has noted that further consultations will take place regarding today's announcements. The Government is expected to release draft legislation for public comment after the middle of this year and proposes to introduce legislation into Parliament before the end of 2011. For further details, refer to the Government's announcement and the FOFA information pack. (For background information on the FOFA reforms, refer to our Breaking News for 26 April 2010.)

Government announces release of consultation paper on review of compensation arrangements for financial services
20 April 2011

The Government has today launched a consultation paper, Review of compensation arrangements for consumers of financial services, which was prepared by financial services and corporate governance expert, Richard St John, as part of the Future of Financial Advice reforms, which were announced by the Government in April last year.

The consultation paper provides information, frames issues and raises questions on the need for, and costs and benefits of, a statutory compensation scheme for clients who suffer damage or incur loss as a result of misconduct by persons with whom they have dealt in the financial services sector. In particular:

• Chapter 1 deals with the context and scope of the review, and provides background on the overall regulatory framework for financial services.
• Chapter 2 describes the current compensation arrangements within that regulatory framework.
• Chapter 3 addresses the operation of those compensation arrangements in practice.
• Chapter 4 provides a comparison with compensation arrangements in other countries and industry sectors.
• Chapter 5 provides some preliminary observations and draws out issues for further consideration.
• Attachments A and B summarise the relevant regulations and the compensation arrangements in other jurisdictions (EU, Canada and the US).

The closing date for submissions is 1 June 2011. For further information and to obtain a copy of the consultation paper, refer to the Future of Financial Advice section of the Treasury website. For more information about the Future of Financial Advice reforms, refer to our Breaking News for 26 April 2010.

ASIC invites feedback on proposals to improve disclosure for hedge funds
24 February 2011

ASIC has today released consultation paper CP 147 Hedge funds: Improving disclosure for retail investors, which seeks feedback on enhancements aimed at ensuring retail investors and their advisers have the information they need to make an informed investment decision about the risks posed by hedge funds.

In defining the scope of the proposed disclosure guidance, ASIC has focused on funds that are promoted, or likely to be regarded, as hedge funds. ASIC has also identified some characteristics that will help identify the type of strategy pursued, the complexity of the structure and the use of leverage, derivatives and short selling. As part of this consultation, ASIC is also seeking feedback on how the proposed disclosure guidance will interact with the tailored PDS requirements for simple managed investment schemes.

The closing date for comments is 21 April 2011. ASIC proposes to release a second consultation paper mid year, with the finalised regulatory guide due by later this year.

For further details (including to access CP 147), refer to the ASIC website.

Government releases exposure draft of Trustee Companies Bill
31 January 2011

The Government has today released an exposure draft of the Corporations and Other Legislation Amendment (Trustee Companies and Other Measures) Bill 2011, which amends the trustee company provisions in Ch 5D of the Corporations Act. The proposed amendments include: the establishment of a mechanism for the voluntary transfer of trustee company business from an existing entity to a licensed trustee company; and, changes to the operation of common funds and the drawing down, and imposition, of fees.

The draft Bill is open for public comment for the next two weeks. For further details (including to access a copy of the draft Bill and explanatory materials), refer to the Treasury website.

Government releases options paper on distinction between retail and wholesale investor
24 January 2011

The Government has today, as part of its Future of Financial Advice reforms agenda, released an options paper reviewing the distinction between retail and wholesale clients in the Corporations Act 2001. The options paper:

• discusses the rationale for the review
• presents options for reform, including:
  • retaining and updating the current system to recognise and account for problems experienced during the GFC
  • removing the distinction between retail and wholesale clients so that all clients receive protections and disclosures currently only afforded to retail clients
  • introducing a subjective 'sophisticated investor' test based on the client's experience and ability to understand the product as the sole distinction.

The closing date for submissions on the options paper is 25 February 2011.

For further information (including to access a copy of the options paper), refer to the Future of Financial Advice reforms website. For background details about the Future of Financial Advice reforms, refer to our Breaking News for 26 April 2010.

ASIC issues latest report on relief applications from financial services providers (1 June – 30 September 2010)
18 January 2011

ASIC has today released a report, Overview of decisions on relief applications,  outlining decisions on recent applications from capital markets participants, financial services providers, and credit providers and intermediaries.

The report, which covers applications considered by ASIC between 1 June and 30 September 2010, provides an overview of the circumstances in which ASIC exercised, or refused to exercise, its discretionary powers to grant relief and also outlines limited instances where ASIC decided to take a no-action position in relation to non-compliance with the relevant legislative provisions (under the Corporations Act and the National Credit legislation).

For further details (and to access a copy of the report), refer to the ASIC website.

ASIC releases guidance to provide greater certainty about delivering online financial services disclosures
13 December 2010

ASIC today released guidance to provide greater certainty for financial services providers who supply financial services disclosures – such as product disclosure statements – to clients using online means, including email and the internet.

While the Corporations Act 2001 (Act) allows the online delivery of financial services disclosures in many cases, ASIC understands that some providers have been discouraged from doing so because of uncertainty about what specific practices the law permits.

In the guidance released today - Regulatory Guide 221 Facilitating online financial services disclosures (RG 221) – ASIC has set out:

• its interpretation of the online disclosure provisions under the Act; and
• the relief ASIC has given in [CO 10/1219] to enable providers to deliver:
  • PDSs, FSGs, and SOAs by sending a written notice (paper or electronic) with a reference to a website address where the disclosure can be found; and
  • PDSs and FSGs by sending an email with a hyperlink to the disclosure

if the client or the client's agent agrees to receive disclosure in this way.

RG 221 also includes good practice guidance for online delivery of financial services disclosures to ensure that clients receive clear, concise and effective information as well as minimising their exposure to security risks where disclosures are delivered online – noting that some industry standards (eg, the EFT Code) may prohibit or discourage delivery by methods such as hyperlinks.

ASIC believes providers of financial services disclosures should always consider which form of delivery of disclosure (paper or online) best suits their clients.

For further information (and to access the relevant documents), refer to ASIC's website

ASIC releases guidance to improve margin lending disclosure
10 November 2010

ASIC has today released regulatory guidance which aims to improve protections for retail clients through better disclosure of non-standard margin lending facilities.

Non-standard margin lending facilities are margin lending arrangements that use a type of ‘securities lending' agreement instead of a loan agreement. Until 2008, non-standard margin lending facilities were used by companies such as Opes Prime Stockbroking Limited and Tricom Equities Limited.

The key difference between standard and non-standard margin lending facilities is that in a non-standard margin lending facility, ownership of the securities under the margin loan passes to the lender and may pass to the lender's financiers. This can create significant risks for investors.

RG 219 Non-standard margin lending facilities: Disclosure to investors outlines the information that ASIC expects a provider to include in a Product Disclosure Statement for a non-standard margin lending facility. These requirements include:

• how the product differs from a standard margin lending facility;
• an explanation of the transfer of securities from the client to the provider of the facility and the risks associated with that transfer;
• a clear warning to the client of their responsibility to monitor the margin under the facility; and
• an explanation of the tax consequences of the transaction, together with a stark warning that the client should seek tax advice before entering into the transaction.

For further information (and to access the relevant documents), refer to ASIC's website.

ASIC consults on compensation requirements for traditional trustee company services
23 September 2010

ASIC has released a consultation paper inviting feedback on its proposal regarding the administration of compensation requirements for trustee companies providing traditional trustee company services (traditional services) to retail clients.

Under legislation enacted in late 2009, the provision of traditional services by trustee companies, such as preparing wills, is now regulated as a financial service under the Corporations Act 2001 (Corporations Act). Trustee companies providing traditional services are now supervised by ASIC and will be required, among other things, to meet the compensation requirements under the Corporations Act.

ASIC proposes to apply its existing policy on administering the compensation requirements contained in Regulatory Guide 126 Licensing: Compensation and insurance arrangements for AFS licensees (RG 126) to trustee companies providing traditional services to retail clients.

ASIC invites comment on Consultation Paper 139 Compensation and insurance arrangements for trustee companies providing traditional services (CP 139). In particular, ASIC is interested in feedback on whether the method of calculating the amount of professional indemnity insurance cover contained in RG 126 is appropriate for trustee companies providing traditional services.

ASIC's existing policies and regulatory documents on financial services will generally apply to trustee companies that provide traditional services.

Submissions on the proposal contained in the consultation paper close on 18 October 2010. Details on how to make a submission are contained in CP 139.

For further information (and to access the relevant documents), refer to ASIC's website. For background information, refer to our Breaking News for 1 March 2010, 15 March 2010, 7 May 2010 and 17 September 2010.

ASIC consults on dispute resolution requirements for traditional trustee company services
17 September 2010

ASIC has released a consultation paper seeking public comment on dispute resolution arrangements required of trustee companies providing traditional services, like preparing wills.

Under the Corporations Act 2001 (Corporations Act), trustee companies as Australian financial services (AFS) licensees, must have dispute resolution arrangements for clients and beneficiaries from 1 May 2011.

Specifically, trustee companies must have an internal dispute resolution system for handling client complaints and be a member of an ASIC-approved external dispute resolution (EDR) scheme.

ASIC is currently consulting on how the dispute resolution framework should apply so it is efficient and effective for clients of traditional services (see ASIC's Consultation Paper 138 Dispute resolution requirements for trustee companies providing traditional services (CP 138).

The dispute resolution requirements that currently apply to AFS licensees, Australian credit licensees and their representatives, are set out in:

• Regulatory Guide 165 Licensing: Internal and external dispute resolution (RG 165); and
• Regulatory Guide 139 Approval and oversight of external dispute resolution schemes (RG 139).

CP 138 talks about how RG 165 and RG 139 may be updated and refined for traditional services.

Some of the key proposals on which ASIC is consulting include:

• whether to set a higher compensation cap (than otherwise applies under EDR) where complaints involve beneficiaries. This is because deceased estates would commonly include the family home and a mix of other assets;
• ensuring that scheme outcomes are effective for complaints involving more than one beneficiary by requiring all beneficiaries to agree to the EDR scheme hearing the complaint; and
• what exclusions from EDR scheme jurisdiction should apply to trustee companies providing traditional services.

Submissions close on 11 November 2010.

For further information (and to access the relevant documents), refer to ASIC's website. For background information, refer to our Breaking News for 1 March 2010, 15 March 2010 and 7 May 2010.

ASIC updates guidance on product disclosure statements
6 September 2010

ASIC has today released updated Regulatory Guide 168 Disclosure: Product Disclosure Statements (and other disclosure obligations) (RG 168).

The updated guide reflects key findings from ASIC's recent report Review of disclosure for capital protected products and retail structured or derivative products (REP 201) which was based on a program by ASIC which involved the review of 64 Product Disclosure Statements (PDS) for adequacy of disclosure.

In particular, ASIC recommends issuers:

• clearly explain counterparty risk, and include supporting financial information, to ensure retail investors can assess the issuer's financial ability to meet its counterparty obligations
• of capital protected products, ensure disclosure is sufficient so that investors can assess the likelihood of early termination or any other significant limitations of these products
• provide better disclosure of break costs that may apply where an investor seeks to terminate or redeem a product before its maturity date.

The update does not otherwise change ASIC's existing policy on PDS disclosure.

Updated RG168 consolidates guidance currently provided by ASIC in various locations and formats and provides a single guide for product issuers and other individuals responsible for PDSs and other disclosure obligations. It also refers to recent reforms to the Corporations Act and Regulations relating to shorter, simpler PDSs. These were developed by the Financial Services Working Group (comprising officials from the Department of Treasury, the Department of Finance and Deregulation and ASIC).

Further amendments may be made to RG 168 in due course that provide guidance about these reforms.

For further information (and to access the relevant documents), refer to ASIC's website. (For background information, refer to our Breaking News for 22 July 2010).

ASIC provides relief for parent entity financial statements
29 July 2010

ASIC has today announced the making of a new class order, (CO 10/654), to allow companies, registered schemes and disclosing entities that present consolidated financial statements to also present parent entity financial statements.

In addition to the new class order, a previous class order, (CO 05/642), has been amended to permit the issuers of stapled securities that present their financial statements in one financial report not to present single entity financial statements for those stapled entities that have consolidated financial statements.

Background

The Corporations Amendment (Corporate Reporting Reform) Act 2010 (CRRA) was given Royal Assent on 29 June 2010 and became effective from 1 July 2010. CRRA amended the Corporations Act 2001 (the Act) so that those entities reporting under Chapter 2M that present consolidated financial statements are no longer required to present parent entity financial statements. This change applies for financial reports for the year ended 30 June 2010.

Australian financial services (AFS) licensees continue to be required to present parent entity financial statements under Chapter 7 of the Act. The Act now prevents entities reporting under Chapter 2M from presenting parent entity financial statements. However, some entities want to present parent entity financial statements:

• to avoid the cost of changing their reporting formats, particularly for 30 June 2010 year ends;
• because they are AFS licensees that are required to present parent entity financial statements under Chapter 7 of the Act; or
• because they believe that the parent entity financial statements provide useful information to users of their financial reports.

For further information (and to access the relevant documents), refer to ASIC's website.

ASIC updates disclosure guidance for capital protected products and retail structured or derivative products
22 July 2010

ASIC has today released a report outlining its key findings from a review of selected Product Disclosure Statements (PDSs) for capital protected products and other structured or derivative products marketed to retail investors.

The report, Review of disclosure for capital protected products and retail structured or derivative products, is the result of a program commenced by ASIC in January 2009 and has involved the review of 64 PDSs for adequacy of disclosure.

ASIC focused on capital protected products as investors may be attracted to these investments due to a perception of capital safety without fully comprehending the inherent risks.

The report also reviews structured and derivative products marketed to retail investors given increased retail participation in these complex products where associated risks and costs may not be anticipated or understood.

Issuers of these types of products should take account of the findings of this report in order to make more effective disclosure to prospective investors. In particular, ASIC recommends issuers:

• clearly explain counterparty risk, and include supporting financial information, to ensure retail investors can assess the issuer's financial ability to meet its counterparty obligations
• of capital protected products, ensure disclosure is sufficient so that investors can assess the likelihood of early termination or any other significant limitations of these products
• provide better disclosure of break costs that may apply where an investor seeks to terminate or redeem a product before its maturity date.

ASIC will reflect the key findings of its review in updates to Regulatory Guide 168 Disclosure: Product Disclosure Statements (and other disclosure obligations.

ASIC has also released a factsheet for consumers, Get the facts: Capital guaranteed or protected investments, which outlines some important things investors need to consider before investing in capital guaranteed or capital protected products. The factsheet is available from ASIC's consumer website, www.fido.gov.au

This review was conducted as part of ASIC's first priority, which is to assist and protect retail investors and consumers in the financial economy.

For further information (and to access the relevant documents), refer to ASIC's website.

ASIC to Take Over Supervision of Australia's Financial Markets From 1 August 2010
8 July 2010

Chris Bowen, Minister for Financial Services, Superannuation and Corporate Law has today announced that the transfer of supervisory responsibility for Australia's domestic licensed financial markets will take place on 1 August 2010.

This follows the proclamation of the relevant Act and approval of the relevant regulations earlier today by the Executive Council.

The Minister also announced his intention to approve the Market Integrity Rules on which industry has been consulted. These rules, together with the amended ASX operating rules, which the Minister also announced he would allow, will form the regulatory rules for the new market supervision regime.

On Wednesday 7 July 2010, ASIC and ASX concluded an historic and formal agreement on the transfer of certain supervisory activities to ASIC. The agreement will underpin their continued cooperation in ensuring a seamless transition from ASX to ASIC on 1 August 2010 and their continued cooperation going forward.

For further details refer to the ASIC website. For background information, refer to our Breaking News for 18 June 2010, 13 May 2010 and 10 February 2010.

ASIC amends Class Order 08/1 and its policy regarding group purchasing bodies
29 June 2010

ASIC has announced that Regulatory Guide 195: Group purchasing bodies for insurance and risk products (RG 195) has been amended to clarify when ASIC may grant relief from the Australian financial services licensing and disclosure regime and Ch 5C of the Corporations Act 2001 for some group purchasing bodies and to also give additional guidance on how the conditions for relief operate.

RG 195 explains the relief ASIC has given for bodies that purchase risk management products (eg, insurance) for groups of people and what the group purchasing bodies must do in order to receive the benefit of ASIC relief.

CO 08/1 gives conditional relief from the Australian financial services licensing and disclosure regime and Ch 5C of the Corporations Act 2001 for some group purchasing bodies who arrange or hold risk management products (insurance) for the benefit of third parties.

Under the changes the period for compliance with the breach reporting requirements in ASIC CO 08/1 will commence the first time that the group purchasing body acquires, renews or renegotiates the terms of the risk management product on or after 31 December 2010, but in any event no later than 31 December 2011.

The changes are set out in ASIC CO 10/177, which amends ASIC CO 08/1.

CO 10/177 also clarifies the relief available for eligible group purchasing bodies that are arranging and holding risk management products or operating a risk management scheme.

For further details refer to the ASIC website. For background information, refer to our Breaking News for 24 February 2010.

ASIC strengthens disclosure requirements for debentures and unsecured notes
25 June 2010

ASIC has today released updated requirements for unlisted debentures and unsecured notes to improve disclosure to retail investors. The guidance is set out in an updated version of Regulatory Guide 69 Debentures and unsecured notes–improving disclosure for retail investors (RG 69).

The updated version of RG 69 sets out:

• adjustments to the eight benchmarks that issuers should disclose against on an 'if not, why not?' basis from 1 September 2010, including those relating to minimum amounts of equity capital; adequate liquidity; and disclosure about loan portfolios and valuations
• the plain-English explanations that issuers should provide in prospectuses from 1 September 2010 about the importance of their benchmark disclosures
• ormation on naming restrictions that will apply to debentures and unsecured notes under s283BH of the Corporations Act 2001 from 1 July 2011.

From 1 July 2011, ASIC will no longer permit some products to be called debentures. It will discontinue its interim no action position announced in 2005 in relation to non-compliance with the naming restrictions in s283BH limiting the types of financial products that can be called debentures. This will mean products not secured over tangible property (ie, property with an actual physical existence) will need to be called unsecured notes or unsecured deposit notes. ASIC have adopted this approach following concerns that some issuers that have failed over the past two years have incorrectly described their products as debentures implying the products had a greater level of security than was actually the case.

The updated policy is subject to transitional periods and follows industry consultation as outlined in the newly released Report 200 Response to submissions on CP 123 Debentures: Strengthening the disclosure benchmarks (REP 200) discussing the submissions received on the proposals in the consultation paper and outlining ASIC's response to the submissions.

Finally, ASIC has also made consequential amendments to Regulatory Guide 156 Debenture and unsecured note advertising (RG 156), which sets outs ASIC's policy for issuers advertising debentures and unsecured notes, and will soon release updated versions of the ASIC investor guide regarding unlisted debentures and unsecured notes and Pro Forma 223 'Interim auditor's benchmark report'.

For further information (and to access the relevant documents), refer to ASIC's website. (For background information, refer to our Breaking News for 22 October 2009).

Amending Regulations prescribing shorter and simpler Product Disclosure Statements for financial products registered on the FRLI
21 June 2010

The Corporations Amendment Regulations 2010 (No 5) (Cth) (the Regulations), which were made on 15 June 2010, were registered today (21 June) on the FRLI.

These Regulations amend the Corporations Regulations 2001 to prescribe the form and contents of shorter and simplified Product Disclosure Statements (PDSs) for financial products including margin loans, superannuation products and simple managed investment schemes (MIS).

The Regulations prescribe a maximum length of eight (A4) pages for superannuation and MIS PDSs, and four pages for margin loan PDSs (not including title and contents sections), together with a minimum font size, depending on the nature of the content.

For the purposes of the Regulations for MIS, only schemes investing predominantly in assets that are easily realisable are included within the shorter PDS regime.

For superannuation and MIS PDSs, a 24 month transition period is provided. After the initial 12 months, parties have to comply with the new regime if they amend an existing PDS or offer new products requiring a new PDS. After 24 months, all PDSs need to comply with the new regime. For margin loan PDSs, the provisions apply from 1 January 2011.

Reforms to the Supervision of Australia's Financial Markets – Exposure Draft of Fees Regulations and Consultation Paper
18 June 2010

In August 2009 the Government announced that it would transfer the responsibility for supervision of Australia's domestic licensed financial markets from market operators to the Australian Securities and Investments Commission (ASIC). The Corporations Amendment (Financial Market Supervision) Act 2010 received Royal Assent on 25 March 2010.

The Corporations (Fees) Amendment Act 2010 supports this transfer by allowing ASIC to levy fees on market operators to cover its costs for supervision. The proposed Corporations (Fees) Amendment Regulations 2010 support this Act. The regulations set out details of the proposed fees structure, including dates, amounts, and other points of reference by which fees will be levied.

Comments on the exposure draft of the proposed regulations are due by 28 June 2010. For further detail (including to access a copy of the exposure draft of the proposed regulations), refer to the Treasury website (http://www.treasury.gov.au). For background information, refer to our Breaking News for 13 May 2010 and 10 February 2010.

Updated ASIC guidance helps industry prepare for credit licensing
8 June 2010

ASIC has today issued updated policy guidance, and details of the standard conditions that will be imposed by ASIC on credit licences, to assist those individuals and entities intending to engage in credit activities after 1 July 2010.

The updated guidance is contained in:

• Regulatory Guide 203 Do I need an Australian credit licence (RG 203); and
• Regulatory Guide 204 Applying for and varying an Australian credit licence (RG 204).

The changes to the regulatory guides generally reflect the final form of the National Consumer Credit Protection Act 2009, National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 and associated regulations, rather than substantive changes to ASIC's current policies and approach to administering the new regime. ASIC has also taken the opportunity to clarify some issues that have been raised by industry.

ASIC has also released Pro Forma 224 Australian credit licence conditions (PF 224) which contains the standard licence conditions that will be imposed by ASIC on credit licences.

RG203 contains information to help people who engage in credit activities to understand whether they need to be licensed. Key changes to RG 203 include:

• Updates to information about the treatment of people who engage in credit activities in relation to credit contracts and consumer leases that were entered before 1 July 2010 (carried over instruments). Further information about carried over instruments is contained in ASIC Information Sheet 110 Lenders with carried over instruments (INFO 110)
• Clarification that the licensing requirements only apply to a provision of credit where the credit is connected with Australia, and that activities performed outside Australia will only be caught where they relate to credit provided in the course of a credit business carried on in Australia
• Additional information to illustrate when debt management services will be subject to the licensing requirements.

RG 204 outlines the process for applying for a credit licence and the questions that will be asked in the application. Key changes to RG 204 include:

• Updates to information about the licence application process for credit providers and lessors that engage in credit activities in relation to carried over instruments. More detailed information on credit providers and lessors that can choose to engage in credit activities as unlicensed carried over instrument lenders under a modified statutory regime is contained in INFO 110
• Updates to information about the calculation of the licence application fee
• Information about additional types of streamlined applicants
• Updates to information about ASIC's process for assessing applications of streamlined applicants, and limitations that will be placed on the authorisations that will be given to some types of licensees (i.e. lenders mortgage insurers and life insurers that rely on the streamlining process, and assignee debt collectors)
• Updates to information about the types of entities that can apply for a licence to include bodies corporate other than companies and registered Australian bodies
• Updates to information about the questions that will be included in the application about systems and arrangement for complying with the general conduct obligations, and ASIC's process for assessing an applicant's ability to comply with those obligations
• Updates to information about the background checks that are required for people involved in the management of the applicant, including removal of the requirement for bankruptcy checks and expansion of the acceptable types of criminal history check and credit history reports.

PF 224 sets out each of the standard conditions that will be imposed by ASIC on credit licences.

ASIC will impose these conditions on all credit licences at the time that the licence is granted to support the statutory requirements and the minimum requirements that ASIC has set in its regulatory guides dealing with the general conduct obligations of credit licensees. These conditions are additional to the conditions set out in regulation 9 of the National Consumer Credit Protection Regulations 2010.

For further details (including to access copies of the updated regulatory guides), refer to the ASIC website. For background information, refer to our Breaking News for 1 December 2009.

Government Commences Consultation on Future of Financial Advice Reforms
17 May 2010

Chris Bowen, Minister for Financial Services, Superannuation and Corporate Law has today announced the commencement of consultation on the Future of Financial Advice reforms announced on 26 April 2010.

A new Future of Financial Advice website (http://futureofadvice.treasury.gov.au) provides information on the reforms and the implementation process, answers frequently asked questions, and enables the public to provide feedback about the reforms.

Stakeholders who wish to contribute views and information can email futureofadvice@treasury.gov.au.

For further details refer to the Treasury website (http://www.treasury.gov.au). For background information on the Future of Financial Advice reforms, refer to our Breaking News for 26 April 2010 .

Government releases exposure draft of regulations and consultation paper – Reforms to the Supervision of Australia's Financial Markets
13 May 2010

In August 2009 the Government announced that it would transfer the responsibility for supervision of Australia's domestic licensed financial markets from market operators to ASIC. The Corporations Amendment (Financial Market Supervision) Act 2010 (Cth) received Royal Assent on 25 March 2010.

The proposed Corporations Amendment Regulations 2010 support the Act, providing details of the infringement notice and enforceable undertaking regimes established under the Act, transitional arrangements, and expanding the group of entities to which the market integrity rules apply.

Comments on the exposure draft of the proposed regulations are due by 11 June 2010. For further detail (including to access a copy of the exposure draft of the proposed regulations and consultation paper), refer to the Treasury website (http://www.treasury.gov.au). For background information, refer to our Breaking News for 10 February 2010.

Regulations made supporting the new margin loan regulatory regime
7 May 2010

Regulations were introduced today to support regulating margin loans as financial products.

Recently, the Corporations Act 2001 was amended by the Corporations Legislation Amendment (Financial Services Modernisation) Act 2009 for the purpose of regulating certain financial products, including margin lending facilities. A margin lending facility is defined in new s761EA of the Corporations Act, and relates principally to the provision of credit wholly or partly to acquire one or more financial products (which is also defined in the Corporations Act).

Inserting margin lending facilities into Chapter 7 of the Corporations Act ensured that the investor protection regime contained in the Corporations Act applies to margin loans. The regime consists mainly of a range of licensing, conduct and disclosure requirements that apply to providers of financial products and services as defined in the Corporations Act. Under the previous State and Territory-based consumer credit regime, margin loan borrowers did not benefit from any protection measures specifically tailored to their requirements.

Some of the main provisions introduced by the new regime include the following.

• A number of matters are prescribed that lenders must take into account when conducting the unsuitability assessment.
• Where a financial services provider is required to provide both a Financial Services Guide and a Credit Guide to a retail consumer, they may combine the information into a single document.
• Prescribing that a margin lending facility is a financial product for the purposes of the Australian Securities and Investments Commission Act (ASIC Act). This ensures that the general consumer protection measures which apply to other financial products under the ASIC Act extend to margin loans, including prohibitions from engaging in unconscionable conduct or conduct that is misleading or deceptive, and from making false or misleading representations.

The new regulations commence on 1 January 2011. For further details, refer to the COMLAW website.

(For background information on the Corporations Legislation Amendment (Financial Services Modernisation) Act 2009 and the regulation of margin lending, refer to our Breaking News for 1 February 2010 and 7 December 2009).

National Regulation of Trustee Companies Commences
7 May 2010

Chris Bowen, Minister for Financial Services, Superannuation and Corporate Law has today announced the commencement of national regulation of licensed trustee companies.

The national regime is contained in Schedule 2 of the Corporations Legislation Amendment (Financial Services Modernisation) Act 2009, and in regulations amending the Corporations Regulations 2001 and the Australian Securities and Investments Commission Regulations 2001, all of which commenced on 6 May 2010.

To access copies of the package of legislation, regulations and related explanatory material, please refer to COMLAW website.

For background information, refer to our Breaking News for 1 March 2010, 15 March 2010 and 7 May 2010 .

Information for trustee companies providing traditional services
7 May 2010

ASIC has today released updated policy and regulatory guidance to assist trustee companies providing traditional trustee company services (traditional services) to comply with the licensing and conduct requirements under the Corporations Act. These traditional services include administering deceased estates and powers of attorney.

Under legislation enacted late last year, the provision of traditional services by trustee companies will be regulated as a financial service under the Corporations Act. Trustee companies providing traditional services will be required to hold an Australian Financial Services (AFS) licence, and will be subject to the licensing and conduct obligations under Ch 7 of the Corporations Act. Trustee companies that will have to comply with the Corporations Act requirements are specifically named in a Schedule to the Corporations Regulations.

A number of ASIC's existing regulatory guides have been updated to take into account, among other things, the provision of traditional services by trustee companies as a financial service:

• Regulatory Guide 1 AFS Licensing Kit: Part 1 – Applying for and varying an AFS licence (RG 1), Regulatory Guide 2 AFS Licensing Kit: Part 2 – Preparing your AFS licence application (RG 2) and Regulatory Guide 3 AFS Licensing Kit: Part 3 – Preparing your additional proofs (RG 3);
• Regulatory Guide 166 Licensing: Financial requirements (RG 166); and
• Pro Forma 209 Australian financial services licence conditions (PF 209).

ASIC have also released INFO 106 Trustee companies: Minimum standards for trustee companies holding estate assets (INFO 106).

ASIC also plans to issue regulatory guidance on compensation and dispute resolution requirements for trustee companies later this year.

ASIC's existing policies and regulatory documents on financial services (except in relation to compensation and dispute resolution requirements), will apply to the provision of traditional services by trustee companies.

The Commonwealth regime for the regulation of the provision of traditional services by trustee companies commences on 6 May 2010.

Trustee companies which hold an AFS licence as at 6 May 2010 are taken to have a licence that covers the provision of traditional services for six months from the commencement date. They will need to apply to ASIC to vary their licence to cover traditional services if they intend to continue to provide traditional services after 6 November 2010.

Trustee companies which do not hold an AFS licence as at 6 May 2010 are deemed to have a licence covering only traditional services for 12 months. They will need to apply to ASIC to obtain a licence covering those services if they want to continue to provide traditional services after 30 April 2011.

For further information (including to see copies of the existing and updated regulatory guides), refer to the ASIC website. For background information, refer to our Breaking News for 1 March 2010 and 15 March 2010.

Overhaul of Financial Advice
26 April 2010

The Government has today announced reforms to financial advice that it says will improve the trust and confidence of Australian retail investors in the financial planning sector.

These reforms are the Government's response to the recent Inquiry into Financial Products and Services in Australia by the Parliamentary Joint Committee on Corporations and Financial Services, which was set up in the wake of collapses such as Storm Financial and Opes Prime.

The Future of Financial Advice package includes the following.

• A prospective ban on conflicted remuneration structures, including commissions and volume based payments, in relation to the distribution and advice of retail investment products including managed investments, superannuation and margin loans. The measure does not initially apply to risk insurance.
• The introduction of a statutory fiduciary duty for financial advisers requiring them to act in the best interests of their clients and to place the best interests of their clients ahead of their own when providing personal advice to retail clients.
• The introduction of a 'product neutral' adviser charging regime, which retains a range of flexible options for which consumers can pay for advice and includes a requirement for retail clients to agree to the fees and to annually renew (by opting in) to an adviser's continued services.
• Percentage-based fees (known as assets under management fees) will only be charged on ungeared products or investment amounts and only if this is agreed to with the retail investor.
• Expanding the availability of low-cost 'simple advice' to provide access to and affordability of financial advice.
• Strengthening the powers of the Australian Securities and Investments Commission, in relation to the licensing and banning of individuals from the financial services industry.
• Expert review of the need for a statutory compensation scheme for financial services.

The majority of these reforms will commence from 1 July 2012 and the Government will consult with industry on the implementation of the reforms.

For further information refer to the Treasury website (www.treasury.gov.au).

ASIC consults to improve disclosure by infrastructure entities
19 April 2010

ASIC has today released a consultation paper, CP 134 Infrastructure entities: Improving disclosure for retail investors, aimed at improving disclosure to retail investors by infrastructure entities, including listed and unlisted companies and registered managed investment schemes.

ASIC is proposing a benchmark-based disclosure model for infrastructure entities, against which they must report. The proposed benchmarks focus on key issues including corporate structure and management, funding, assumptions in models and sensitivity analysis of those assumptions, valuation, distribution, withdrawal and diversification.

Comments on the consultation paper are due by 30 June 2010, with ASIC proposing to release a regulatory guide in September 2010.

ASIC will produce a companion investor guide to help investors in infrastructure entities better understand the information provided and make more informed investment decisions. For further information (and to access a copy of CP 134), refer to the ASIC website.

ASIC consults to improve agribusiness scheme disclosure
8 April 2010

ASIC has today released a consultation paper, CP 133 Agribusiness managed investment schemes: Improving disclosure for retail investors, aimed at ensuring that retail investors are better informed about agribusiness schemes and their associated risks. ASIC is proposing a benchmark-based disclosure model for unlisted agribusiness schemes, against which the responsible entities must report on an ‘if not, why not' basis.

The 10 proposed benchmarks are designed to improve disclosure for retail investors to enable them to make more informed decisions about these investments and to make comparisons between schemes more straightforward. ASIC has noted that it will also produce a companion investor guide to help investors in agribusiness schemes better understand the information provided by responsible entities.

Comments on the consultation paper are due by 31 May 2010, with ASIC proposing to release a regulatory guide in July 2010. Responsible entities of existing agribusiness schemes will be required to report against the benchmarks to existing investors by 30 September 2010 and include in all PDSs issued after 30 September 2010. For further information (and to access a copy of CP 133), refer to the ASIC website. 

ASIC announces that credit industry participants can register for an Australian Credit Licence
1 April 2010

ASIC has today announced that from now until 30 June 2010, lenders, brokers and intermediaries dealing in consumer credit can register for an Australian Credit Licence, in accordance with the requirements of the National Consumer Credit Protection Act (NCA). Registration with ASIC, which must be done online and is the first step in complying with the new licensing obligations under the NCA, allows industry participants who will require a licence under the NCA to continue to engage in credit activities from 1 July 2010 until the licence application process is complete. Registered credit participants will then have six months (1 July-31 December 2010) to apply for a credit licence. Industry participants who haven't registered with ASIC by 30 June 2010 must stop engaging in credit activities until they have a credit licence.

For further details about the registration and licensing processes (including to access the online registration form), refer to the ASIC website.

Government Announces Competition in Financial Markets
31 March 2010

The Minister for Financial Services, Superannuation and Corporate Law, today announced the Government's support for competition between markets for trading in listed shares in Australia.

Minister Bowen also announced in-principle approval of Chi-X Australia Pty Ltd's (Chi-X's) Australian market licence application. Chi-X is a wholly-owned Australian-incorporated subsidiary of Chi-X Global Inc, which already operates markets throughout Europe and Canada.

A final decision on Chi-X's licence application will be made after the necessary regulatory framework is in place, including amendments to the Corporations Regulations 2001 and the settling of ASIC-set market integrity rules.

For further information refer to the Treasury website (www.treasury.gov.au).

Guidance for credit licensees about compensation and insurance obligations
30 March 2010

ASIC today released regulatory guidance for credit licensees and insurers about the compensation and professional indemnity (PI) insurance obligations under the National Consumer Credit Protection Act (National Credit Act).

Regulatory Guide 210 Compensation and insurance arrangements for credit licensees (RG 210) sets out how credit licensees can meet their obligation to have adequate compensation arrangements.

Licensees must have arrangements in place for compensating their clients for any loss they suffer if the licensee or its representatives breach their obligations. The primary way to comply with this obligation is to have PI insurance.

RG 210 provides ASIC's view on what is ‘adequate' PI insurance for the purposes of the National Credit Act, including the level and scope of cover that should be provided by a PI insurance policy.

For further information (including to access a copy of RG 210), refer to the ASIC website. 

National Consumer Credit Protection Package – Regulations and Explanatory Materials
16 March 2010

The Minister for Financial Services, Superannuation and Corporate Law has today welcomed the release of the Regulations and explanatory material to the National Consumer Credit Protection Legislation.

The Regulations include the following.

• National Consumer Credit Protection Regulations 2010. The Credit Regulations include arrangements for licensing of persons who engage in credit activities (including exemptions and streamlining procedures), and regulations that would impose standard conditions that would apply to all holders of an Australian credit licence.
• National Consumer Credit Protection (Transitional and Consequential) Regulations 2010. The Transitional Regulations deal with transitional matters including registration of persons who engage in credit activities with the Australian Securities and Investments Commission and the treatment of court proceedings.
• National Consumer Credit Protection (Fees) Regulations 2010. The Fees Regulations include details of the fee structure that will promote certainty and simplicity for industry.

For further information (including to access copies of the regulations and related explanatory material) refer to the Treasury website (www.treasury.gov.au).

ASIC seeks feedback on requirements for trustee companies providing traditional services
15 March 2010

ASIC today released Consultation Paper 132 Trustee companies: Financial requirement and conduct obligations (CP 132) seeking public comment on the financial requirements and other conduct obligations for trustee companies that provide traditional trustee company services (traditional services), such as acting in deceased estates and under powers of attorney.

Under legislation enacted late last year, the provision of traditional services by trustee companies will be regulated as a financial service under the Corporations Act and will be brought under the supervision of ASIC. Revised draft regulations under the Corporations Act for trustee companies were recently released for further public comment. Trustee companies are currently regulated under legislation in each State and Territory.

ASIC will also be consulting on the dispute resolution requirements for trustee companies in due course.

Those trustee companies providing traditional services which currently hold an Australian Financial Services (AFS) licence must vary their licence to include the provision of traditional services within six months of the regulations commencing. Treasury is currently consulting on transitional arrangements for those trustee companies currently providing traditional services that do not hold an AFS licence.

ASIC's existing policies and regulatory documents on financial services, other than financial resources requirements (which are the subject of CP 132) and Regulatory Guide 165 (which is the subject of a consultation paper that will be issued in due course), will generally apply to trustee companies that provide traditional services.

The closing date for submissions on the proposals contained in CP132 is 7 April 2010.

For further information (including to access a copy of CP 132), refer to the ASIC website. For background information, refer to our Breaking News for 1 March 2010.

Corporations Amendment Regulations 2010 – trustee companies – Draft Regulations and Explanatory Material
1 March 2010

Chris Bowen, Minister for Financial Services, Superannuation and Corporate Law has today released for public comment draft Regulations and explanatory material for the Corporations Amendment Regulations 2010 and the Australian Securities and Investments Commission Amendment Regulations 2010 in relation to trustee corporations.

The draft Regulations relate to Schedule 2 of the Corporations Legislation Amendment (Financial Services Modernisation) Act 2009 (the Act). Schedule 2 of the Act inserts Chapter 5D (Licensed trustee companies) into the Corporations Act and amends the financial services regime in Chapter 7 to include traditional trustee company services. It also inserts regulation making powers into the Corporations Act to specifically deal with trustee company matters. Briefly, a trustee company providing a traditional trustee company service as part of its business will need an Australian financial services licence and will therefore be subject to the consumer protection and disclosure requirements of the Corporations Act and the Australian Securities and Investments Commission Act 2001.

The closing date for submissions on the revised draft regulations is 15 March 2010.

For further information (including to access a copy of the draft Regulations and explanatory material) refer to the Treasury website (www.treasury.gov.au). For background information, refer to our Breaking News for 21 August 2009.

ASIC releases guidance for credit licensees about responsible lending obligations
26 February 2010

ASIC has today released 'principles-based' regulatory guidance, RG 209, for credit licensees about the responsible lending obligations in the National Consumer Credit Protection Act (National Credit Act). RG 209, which takes into account that the responsible lending conduct obligations in the National Credit Act are designed to work in a flexible way and that it is the credit licensee's responsibility to put in place arrangements to comply with those obligations, is designed to help credit licensees and credit licence applicants to:

• develop arrangements and systems to meet their responsible lending obligations; and
• understand what ASIC expects when assessing whether licensees are complying with their responsible lending obligations.

The responsible lending conduct obligations will apply to brokers and some lenders from 1 July 2010. ASIC has said that it will continue to assess the need for further guidance following the commencement of the regime.

For further details (including to access a copy of RG 209), refer to the ASIC website.

ASIC consults on market integrity rules
26 February 2010

ASIC has today released Consultation Paper 131 Proposed ASIC Market Integrity Rules – ASX and SFE Markets, which proposes market integrity rules to apply to trading on ASX and SFE markets, based on the existing rules of these markets, while clarifying the supervisory responsibilities of ASIC and market operators. The release of CP 131 follows on from the announcement by the Federal Government in August 2009 that ASIC would take over responsibility for supervision of real-time trading on Australia's domestic licensed markets. (This new role supplements ASIC's existing responsibility for enforcement of the laws against misconduct on Australia's financial markets.)

The closing date for submissions on the proposed market integrity rules outlined in CP 131 is 26 March 2010. For further information (including to access a copy of CP 131), refer to the ASIC website. (For details of the earlier Government announcement, refer to our Breaking News for 24 August 2009.)

ASIC clarifies relief for group insurance arrangements
24 February 2010

ASIC has today issued Class Order CO 10/116 Group purchasing bodies – variation of CO 08/1.

CO 08/1 provides conditional exemptions from the Australian financial services licensing and managed investment scheme registration requirements for certain group purchasing bodies that arrange cover for third parties under insurance (excluding certain foreign insurance).

ASIC has varied CO 08/1 in response to requests for clarification from the insurance industry and some group purchasing bodies to provide certainty about who will be eligible for relief and to introduce greater flexibility for compliance with the conditions of relief.

Regulatory Guide 195: Group purchasing bodies for insurance and risk products, which sets out ASIC's policy on the relief in CO 08/1 has been revised to include more specific guidance and examples.

Group purchasing bodies may be eligible for the relief if they are independent or are acting incidentally to their not-for-profit activities. Conditions apply to the relief to ensure that the risks to people who receive financial services from group purchasing bodies are minimised.

The class order includes a breach reporting obligation which will come into effect from the first time that the group purchasing body acquires, renews or renegotiates the terms of the insurance cover on or after 30 June 2010 but in any event not later than 30 June 2011.

For further details, refer to the ASIC website.

Referrals power Bill introduced into Parliament
10 February 2010

The National Consumer Credit Protection Amendment Bill 2010 was today introduced into the House of Representatives. This Bill makes amendments to the National Consumer Credit Protection Act 2009, which establishes a new national credit protection regime based in part on referrals of power from the States. Tasmania has referred power in the Credit (Commonwealth Powers) Act 2009 which commenced on 17 November 2009. Some other States have requested a variation to the scope of the amendment power as set out in the Tasmanian Act. They have also requested that the national credit protection regime provide for the States to adopt, under paragraph 51(xxxvii) of the Constitution, the National Consumer Credit Protection Act 2009 and National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 at the same time as they refer the amendment power.

The Amendment Bill commences on the day the Bill receives the Royal Assent.

To access copies of the Bill and explanatory material, please refer to COMLAW website.

Government introduces legislation to reform the supervision of Australia's Financial Markets
10 February 2010

The Corporations Amendment (Financial Market Supervision) Bill 2010 was today introduced into the House of Representatives. The Bill will reform the way financial markets in Australia are supervised by amending the Corporations Act 2001 to provide for ASIC to supervise trading on financial markets. The Bill contains three key measures. It:

• removes the obligation on Australian market licensees to supervise their markets, replacing it with an obligation to monitor and enforce compliance with the markets' operating rules;
• provides ASIC with the function of supervising domestic Australian market licensees; and
• provides ASIC with additional powers, including the power to make rules with respect to trading on such markets and additional powers to enforce such rules.

In addition, the Corporations (Fees) Amendment Bill 2010 was today introduced into the House of Representatives. According to the Explanatory Memorandum, the Corporations (Fees) Amendment Bill 2010 provides ASIC with the ability to impose a fee on market operators in relation to the functions it will be performing under the Bill. Regulations specifying how the fee will be calculated and when it will be imposed will also be made.

To access copies of the Bills and explanatory materials, please refer to COMLAW website.

ASIC releases guidance on disclosure of credit ratings in Australia
8 February 2010

ASIC has today released guidance in the form of an information sheet clarifying how credit ratings issued by licensed credit rating agencies (CRAs) may be disclosed in Australia. (This follows on from information released by ASIC in November last year regarding changes to the regulation of CRAs in Australia.)

INFO 99 Disclosure of credit ratings in Australia explains the circumstances in which a person may, and may not, disclose a credit rating in:

• a retail disclosure document or PDS; and
• other documents and communications.

The information sheet also outlines how restrictions on disclosure of credit ratings interact with a person's other obligations (including continuous disclosure obligations).

For further details, including to access INFO 99, refer to the ASIC website. (For details about ASIC's earlier announcement on regulation of CRAs, refer to our Breaking News for 12 November 2009.)

ASIC issues latest report on relief applications from financial services providers (1 April - 31 July 2009)
4 February 2010

ASIC has today released a report, Overview of decisions on relief applications,  outlining decisions on recent applications from the corporate finance, financial services and managed investments provisions of the Corporations Act 2001.

The report, which covers applications considered by ASIC between 1 April and 31 July 2009, provides an overview of the circumstances in which ASIC exercised, or refused to exercise, its discretionary powers to grant relief and also outlines limited instances where ASIC decided to take a no-action position in relation to non-compliance with provisions of the Corporations Act.

For further details, refer to the ASIC website. (For details of previous update reports issued by ASIC, refer to our Breaking News for 3 August 2009, which also contains references to earlier relief application reports issued by ASIC.)

ASIC provides information about margin lending licensing
1 February 2010

ASIC has today issued a release on margin lending licensing under the Corporations Act, following on from the passage of the Corporations Legislation Amendment (Financial Modernisation) Act late last year, which provides for the regulation of margin lending facilities. Details are as follows.

• Issuers and advisers of margin lending facilities will be able to apply for an AFSL, or a variation to an existing licence, from today (1 February 2010) until 30 June 2010.
• Existing margin lenders and advisers on margin loans must apply to ASIC for an AFSL authorisation within this timeframe if they intend to continue to provide a margin lending financial service after the application period closes on 30 June 2010. (Industry participants who fail to do so will have to stop providing such services until they become properly licensed.)
• The new conduct and disclosure requirements for issuers and advisers of margin lending facilities, and the new responsible lending and margin call notification requirements, will take effect from 1 January 2011.

For further details, refer to the ASIC website.

Government announces greater powers to be given to ASIC to pursue market misconduct
28 January 2010

Chris Bowen, Minister for Financial Services, Superannuation and Corporate Law, has today announced proposed changes to the law to:

• strengthen ASIC's investigative powers by empowering ASIC to access telecommunications interception material collected by the Australian Federal Police under a court-issued warrant, and improving ASIC's search warrant powers by dispensing with the need to issue a notice to produce before a warrant is enforced; and
• increase the maximum criminal penalties (pecuniary and term of imprisonment) that can be imposed when individuals and corporations breach market misconduct provisions.

The Government will release an exposure draft of the proposed changes later this year. For further details, refer to the media release issued today by the Minister, which is available on the Treasury website.

ASIC further extends transitional period for compliance with group purchasing bodies class order
28 January 2010

ASIC has today issued class order CO 10/45 Variation of CO 08/1 Group purchasing bodies, extending the transitional period for compliance with the breach reporting requirement in class order CO 08/1 Group purchasing bodies, which was due to expire on 31 January 2010, until 28 February 2010.

You will recall that CO 08/1 gives conditional relief from AFS licensing regime and Chapter 5C of the Corporations Act for some group purchasing bodies who arrange or hold risk management products for the benefit of third parties. ASIC Regulatory Guide 195 Group purchasing bodies for insurance and other risk management products explains ASIC's policy underlying the conditional relief granted in CO 08/1. The further extension of the transitional period has been granted to give ASIC further time to finalise the requirements for how the eligibility tests in CO 08/1 will operate.

For further details (including discussion about how and to whom the class order and extension apply and to access copies of the class orders), refer to ASIC's website. For details about the previous extension granted by ASIC, refer to our Breaking News for 30 September 2009.

Government releases draft financial services measures for consultation
19 January 2010

The Minister for Financial Services, Superannuation and Corporate Law has today released the following for public consultation (with explanatory materials):

• the Financial Sector Legislation Amendment (Prudential Refinements and Other Measures) Bill 2010
• the Banking Amendment Regulations 2010 and the Corporations Amendment Regulations 2010.

Financial Sector Legislation Amendment (Prudential Refinements and Other Measures) Bill
The purpose of this Bill is to further enhance APRA's ability to regulate bodies in the financial sector in accordance with prudential laws (which is consistent with developments overseas where countries such as the UK and the US, have sought to strengthen their financial regulatory frameworks). Specifically, the measures contained in the Bill will further enhance APRA's powers to:

• investigate and detect risks to prudentially regulated institutions and the financial system, and to promote financial system stability;
• compel compliance with, and rectify breaches of, prudential requirements;
• act when regulated financial institutions are at risk of experiencing financial distress and to ensure that distress is resolved without undermining financial stability;
• administer the financial claims scheme, which protects deposits in Australian banks, credit unions and building societies (currently up to a limit of $1 million per depositor) and eligible policyholders of general insurers; and
• collect data that APRA or the Government requires to identify and respond to developments in the financial sector.

This Bill will also make amendments to the financial sector levies frameworks that have been recommended by the 2009 Report of the Review of Financial Sector Levies.

The closing date for submissions on the Bill is 16 March 2010.

Financial Claims Scheme Disclosure Regulations
These regulations arise from amendments in the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Act 2008. Specifically:

the Corporations Amendment Regulations will require ADIs and general insurers to provide information relating to the Financial Claims Scheme in PDSs; and

• the Banking Amendment Regulations will ensure that a statutory manager can be appointed under the Banking Act 1959, notwithstanding the existence of external support arrangements such as the Government's guarantee of deposits.
• The closing date for submissions is 16 February 2010.

For further details, refer to the Commonwealth Treasury website:

APRA consults on implementation of financial claims scheme for authorised deposit-taking institutions
6 January 2010

APRA has today released for consultation a discussion paper containing proposals on the implementation of the Financial Claims Scheme (FCS) for ADIs. The proposals are designed to ensure that, in the case of failure, ADIs are able to provide reliable data in the required format to enable depositors to be paid in a timely manner. The proposals include details on:

• how end-of-day account balances are to be calculated for FCS purposes;
• aggregation of accounts to ensure that each account-holder is able to be identified for the purpose of making payment;
• proposed information collection for FCS purposes; and
• potential payout options.

Subject to industry feedback, APRA will release a draft reporting standard later in 2010 that sets out further detail on proposed information collection requirements. Once the requirements are finalised, there will be a transition period to allow industry time to make changes to their information technology systems for FCS purposes.

Submissions on the discussion paper (which is available from the APRA website at www.apra.gov.au) are due by 12 March 2010

For more see our 2009 news archive, 2008 news archive, 2007 news archive, 2006 news archive, 2005 news archive, 2004 news archive, 2003 news archive and 2002 news archive.