- Countdown to FSR transition deadline
- Minimum training standards relaxed for financial product advisers
- New regulations
- Licensing policy proposal papers
Countdown to FSR transition deadline
ASIC has issued a further reminder to the financial services industry that Australian Financial Services Licences (AFSL) must be in place by 10 March 2004. ASIC cannot grant a general extension to the FSR transition period beyond this date and will only grant extensions in exceptional individual circumstances. A countdown timer has been placed on ASIC's website to remind applicants of the approaching deadline.
Minimum training standards relaxed for financial product advisers
ASIC has updated Policy Statement 146: Licensing: Training of financial product advisers to address industry concerns about costs and unnecessary training. ASIC will now provide greater flexibility to licensees in the development and assessment of training courses for basic deposit products and related non-cash payment products (BDPs). As a result, training courses covering BDPs can now be assessed by the licensee (instead of an authorised assessor) as meeting the Tier 2 training standard. This will relieve licensees of the requirement that they arrange a course assessment by a registered training organisation.
ASIC has also updated PS 146 so that there is no need to assess skills requirements of general advisers in accordance with Appendix B of the Policy Statement.
In addition, other changes to PS 146 clarify:
- the skill requirements for general advice;
- the application of the policy statement to old law licensees;
- the use of scripts by customer service representatives;
- the knowledge requirements for advisers of foreign exchange;
- the compliance date for advisers of consumer credit insurance; and
- the requirement for advisers to obtain a Statement of Attainment (or equivalent).
A summary of the specific amendments is contained in an ASIC information release.
On 26 March, ASIC released an updated version of Pro Forma 209: AFS Licence Conditions, which sets out the conditions that will usually be applied in an AFSL. The Pro Forma has been updated for the changes that ASIC has made to its applicable policies (particularly, PS 146 (training of advisers) and PS 166 (financial requirements for licensees). See the summary of the changes: information release.
(Source: ASIC Information Release, IR03-02, 22 January 2003 and ASIC Information Release, IR03-08, 26 March 2003.)
New regulations
Streamlined licensing
The range of persons who can take advantage of the streamlined licensing procedures under section 1433 of the Corporations Act has been expanded by new regulations that commenced on 11 March 2003. ASIC envisaged that an updated version of the online Licensing Kit would be released by the end of March. To date, this hasn't happened. Other amendments that are implemented by these regulations include:
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the specific inclusion (spot foreign exchange contracts) and exclusion (overseas student health insurance contracts and funeral expenses policies) of products as financial products;
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prescribing additional public holidays on which hawking of financial products will be prohibited; and
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expanding the current exemption from placing an Australian financial services licence (AFSL) number on documents issued before the AFSL has been granted.
Refer to the ASIC website for further guidance on licensing.
Refining operations - draft regulations released
On 12 March 2003 a series of draft regulations were released by Treasury for comment. According to Treasury, these regulations are intended to 'refine the operation of some limited parts of the Financial Services Reform Act 2001(Cth) (the FSR Act ) rather than significantly altering its basic elements'. These regulations provide for:
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clarification of the definition of 'non-cash payment financial product';
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proposed amendment to regulation 7.1.06 (specific things that are not financial products) regarding credit facilities to deal with products that are both credit and deposit facilities under a single arrangement (a 'primary purpose' test is to be introduced);
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proposed regulation in relation to 'making a market' (calculating a unit price with regard to redemption value will not be 'making a market' under s 766D(2) of the Corporations Act);
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proposed regulations to exempt from the licensing requirements (and the obligations to provide a product disclosure statement and financial services guide) people who arrange for non-cash payments or provide information about payment options regarding the supply of goods and services; and
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proposed regulation to apply the Chapter 6D disclosure requirements during the transition period to warrants and options to acquire issued securities.
On 28 March Treasury released another batch of draft regulations (which were amended on 3 April 2003). As with the regulations outlined above, these regulations contain technical amendments to the FSR Act that do not alter its mechanics. The main amendments include:
- removal of the term 'spot foreign exchange contract' (to be replaced by 'foreign exchange contract') to clarify the treatment of these types of products;
- clarification of the value test for derivatives to assess whether a client is wholesale or retail (ie, the value of the derivative will be the cumulative value of what the client actually pays under the arrangement for the derivative rather than the face value of the derivative);
- exemption from the requirement to hold an AFSL in relation to some (overseas) custodial and depository services;
- specific authorisation under the terms of an AFSL to be able to use some terms pursuant to s923B; being financial adviser, financial planner, investment adviser, investment planner, wealth adviser and wealth planner; and
- exemption from the requirement to obtain an AFSL for product issuers who are only providing general advice about their products to licensed intermediaries.
(Source: Treasury Release, 12 March 2003; Treasury Release, 28 March 2003.)
Licensing policy proposal papers
ASIC is currently considering comments received on two policy proposal discussion papers relating to licensing issues that were released at the end of last year. The first paper was ' Licensing: Financial Product Advisers - Conduct and disclosure'. This paper addresses how the various conduct and disclosure obligations, under the Corporations Act, apply to the provision of financial product advice to retail clients.
It is ASIC's intention to release a final policy statement on this by the end of May, 2003.
The second paper is entitled ' Licensing: Discretionary powers - Foreign financial services providers'. The paper outlines the means by which ASIC intends to facilitate the entry of foreign financial services providers who are regulated by overseas regulatory authorities. ASIC has sought industry and consumer comment on the process of recognising other regulatory regimes for this purpose.
ASIC plans to issue a final policy statement during the second quarter of 2003.
ITM will report on any developments on these policy proposals.
(Source: ASIC Information Release IR02/27, 12 December 2002; ASIC Information Release IR02/31, 19 December 2002.)
