The Parliamentary Secretary to the Treasurer, Senator Ian Campbell, today released a list of proposed legislative changes designed to clarify aspects of new arrangements introduced by the Financial Services Reform Act (FSRA).
"The Government and the Australian Securities and Investments Commission have been working closely with industry members to clarify a number of issues. These amendments will promote certainty and facilitate transition to the new arrangements before the deadline of 11 March next year," he said.
The FSR Amendment Bill containing the changes will be introduced into Parliament in the near future. The main amendments are listed in the attachment to this release.
Senator Campbell said consultation and cooperation between the Government, ASIC and the financial services industry had resulted in good progress being made in crossing to the new regime.
"Previous regulatory changes and extensive guidance for industry provided by ASIC through policy statements, frequently asked questions and information releases have helped to build the pace of transition," he said.
"As was the case with earlier changes, this Bill will not alter the fundamentals of the FSRA, but will address matters industry believes may hinder its smooth transition.
"Pending passage of the legislation, interim remedies to impediments are available through regulations or relief action by ASIC in certain circumstances."
CANBERRA
6 June 2003
Contacts:
Wayne Grant, Senator Campbell's Office - 0407 845 2800
Michael Rosser, The Treasury - 6263 3962
ATTACHMENT
MAIN ITEMS FOR INCLUSION IN THE FSR AMENDMENT BILL
1. CORPORATIONS ACT AMENDMENTS
Section 761A - definition of "basic deposit product" - term deposits
The definition of `basic deposit product' will be amended to include all term deposits of a term of two years or less.
Section 761G - meaning of "retail" and "wholesale" client
It will be clarified that, in relation to bundled contracts of insurance, a person is considered to be a retail client only in respect of specific covers under the contract as opposed to the entire contract.
Section 766E - meaning of "custodial or depository service"
An exception to the definition of providing a custodial or depository service currently applies in respect of the operation of certain superannuation funds. It will be clarified that this exception applies only to trustees, as opposed to other providers of services to those funds. A new exception will be provided for the operation of a statutory fund by a life office (which will also include the operation of a benefit fund by a friendly society).
Paragraph 911A(2)(h) - overseas regulatory bodies
Difficulties have come to light with the application of this provision. It is intended to provide an exemption from licensing for certain persons if they meet prescribed conditions, including regulation by an overseas regulatory authority approved by ASIC, and dealing only with wholesale clients. To improve the practical application of the provision, it is proposed to allow ASIC to specify a financial service performed by a person regulated by an overseas regulatory body.
Section 912D - reporting of breaches to ASIC
The requirements relating to notification of breaches of obligations to ASIC will be relaxed, including through extending the basic reporting period, the introduction of a materiality requirement, and specifying that it is only breaches of financial services laws under which ASIC or APRA are given functions and powers that require reporting.
Section 912F - licence numbers on documents
A regulation-making power will be inserted into the section to clarify the list of documents where an AFSL number is required.
Section 916F - appointment of authorised representatives
The period for notification of the appointment of an authorised representative will be extended from 10 to 15 business days. Notification to ASIC of the appointment of individual authorised representatives by a corporate authorised representative will not be required if certain requirements are met. These requirements will be that the individuals are in a specified class to which the licensee has consented; are employees of the corporate authorised representative; provide only general advice; and the advice is provided in relation to specified categories of financial products.
Sections 942A and 1013B - ability to `combine' Financial Services Guides (FSGs) and Product Disclosure Statements (PDSs).
There is uncertainty over whether disclosure documents, such as FSGs and PDSs, can be combined in a single document. Amendments are proposed to permit combination in certain circumstances. These circumstances will be specified by regulation or ASIC relief and will be aimed at ensuring that the effectiveness of the information contained in the document(s) is preserved.
Section 946B - execution-related telephone advice
The provisions relating to execution-related telephone advice will be refined, for example, by including advice that may not result in a transaction (eg. advice to `hold' a financial product) and advice in relation to financial products traded on appropriately regulated overseas markets.
Section 1012G - verbal Product Disclosure Statement (PDS)
An amendment will be made to allow for the oral provision of PDS information in an effective manner that does not unduly affect business practices.
Section 1015D - lodgement of "in use" notices by trustees of self-managed superannuation funds (SMSFs)
Trustees of SMSFs are currently required to lodge a notice with ASIC advising that a PDS or Supplementary PDS is "in use". However, the information which this notice would provide is already generally available to ASIC from the Register of Complying Super Funds database maintained by the Australian Taxation Office. It is therefore proposed to remove the requirement for trustees of SMSFs to lodge in use notices. This will not compromise ASIC's ability to conduct surveillance, but will reduce its administrative workload and reduce compliance costs for SMSFs.
Section 1017B - disclosure of material changes and significant events
It is proposed to clarify the operation of the ongoing disclosure requirements, including in relation to the information required by, the circumstances affected by, and persons subject to the obligation to provide information.
Section 1274 - inspection of registers
It will be clarified that the public may inspect documents lodged with ASIC under sections 1015B (certain PDSs) and 1015D (what are known as "in use" notices).
Parts 7.6-7.9 & 10.2 - ASIC's modification and exemption powers
Modification and exemption powers will be provided to ASIC under Part 7.6 (licensing) in line with its powers under Parts 7.7 to 7.9, to enhance ASIC's ability to grant relief. The powers in Chapter 7 will also be made consistent with those given to ASIC elsewhere in the Corporations Act.
Parts 7.6-7.8 & 7.10 - regulation making powers
To ensure that future FSRA-related issues can be resolved via regulation, more comprehensive general regulation-making powers such as those provided for in section 1020G of Part 7.9 will be included in Parts 7.6, 7.7, 7.8 and 7.10 of the Act.
Part 7.9 - new provisions to regulate off-market share offers
The market value of a financial product will need to be disclosed when any person (licensed or unlicensed) makes an off-market offer to purchase that product from a retail client.
2. ASIC ACT AMENDMENTS1
Section 12AE - saving of State and Territory laws
An amendment is proposed to overcome a potential inconsistency that might prevent the application of the unconscionable conduct provisions of State and Territory fair trading laws.
Section 127 - confidentiality
An amendment is proposed to allow ASIC to disclose confidential information to independent bodies that are established to supervise the conduct of financial markets referred to in Schedule 3 of the Corporations Regulations (but do not themselves operate the market).
1 The proposed amendments to the ASIC Act require a vote by the Ministerial Council on Corporations, and cannot be introduced until a majority of the Council members indicate their support.