Welcome to the latest issue of the KHQ Super Alert. It was a week of new consultations announced, with five different consultation projects being commenced by ASIC and Treasury. This included the draft Financial Accountability regime legislation, a position paper on the retirement income covenant and guidance on financial product anti-hawking.
ASIC – Draft guidance in relation to hawking of financial products
On 21 July 2021, ASIC released a consultation paper and draft regulatory guide in relation to the prohibition on hawking of financial products. The changed anti-hawking legislative regime will commence on 5 October 2021 and these materials are intended to provide ‘additional clarity on how the changes may affect commercial practices, systems and processes…[in order to] help industry prepare for compliance with the new regime once it commences’.
The consultation period closes on 17 August 2021.
Click here for details.
ASIC – Instrument registered in relation to reference checking and information sharing for financial advisers
On 20 July 2021, the ASIC Corporations and Credit (Reference Checking and Information Sharing Protocol) Instrument 2021/429 was registered on the Federal Register of Legislation. According to ASIC, the instrument ‘sets out obligations for licensees to undertake a reference check and share information on an individual seeking to be employed or authorised as a financial adviser’.
Click here and here for details.
Treasury – Position paper on retirement income covenant
On 19 July 2021, Treasury released a position paper on the proposed retirement income covenant and invited public feedback. According to Treasury, the paper:
- ‘outlines a pathway to further develop the retirement phase of superannuation’; and
- explains that the ‘covenant will place a key obligation on trustees to formulate, review regularly and give effect to a retirement income strategy outlining how they plan to assist their members to balance key retirement income objectives’.
The consultation period closes on 6 August 2021.
Click here for details.
Treasury – Draft regulations to exempt insurance in superannuation from deferred sales model for add-on insurance
On 19 July 2021, Treasury released for public consultation exposure draft regulations relating to the deferred sales model for add-on insurance. As referred to in our Super Alert of 16 July 2021, it is proposed that regulations will be introduced to exempt insurance sold within superannuation from the deferred sales model for add-on insurance. These exposure draft regulations released by Treasury ‘prescribe those classes of add-on insurance products that will be exempt’ from the deferred sales model.
The consultation period closes on 6 August 2021.
Click here for details.
ASIC – Further materials for internal dispute resolution changes
On 19 July 2021, ASIC released pilot versions of a data dictionary and glossary for the upcoming implementation of the internal dispute resolution reporting framework. These materials ‘will be tested in a pilot involving financial firms from across relevant industry subsectors in late 2021’. ASIC has explained that the ‘data dictionary sets out the information that financial firms will be required to collect and report to ASIC…[and the] glossary provides explanations about the key terms in the data dictionary’.
ASIC has advised that trustees ‘should now consider how to map their own complaints systems to the data dictionary’.
Click here for details.
Treasury – Draft legislation for Financial Accountability Regime
On 16 July 2021, Treasury released for public consultation the exposure draft legislation and explanatory materials in relation to the Financial Accountability Regime (FAR). According to the Treasury materials, it is proposed that:
- APRA and ASIC will have joint administration of FAR;
- the legislation will be introduced to Parliament in the 2021 spring sitting; and
- FAR will apply to superannuation trustees ‘from the later of 1 July 2023 or 18 months after the commencement of the FAR’.
The consultation period closes on 13 August 2021.
Click here for details.
Treasury – Draft legislation for compensation scheme of last resort
On 16 July 2021, Treasury released for public consultation the proposals paper and exposure draft legislation required to implement recommendation 7.1 of the Royal Commission. This recommendation relates to establishing a compensation scheme of last resort. The scheme proposes to facilitate ‘the payment of limited compensation to eligible consumers who have received a determination for compensation from [AFCA] which remains unpaid’.
According to the proposal paper, superannuation products will not be one of the financial products covered by the scheme. However, ‘personal advice on relevant financial products to retail clients’ will be captured.
The consultation period closes on 13 August 2021.
Click here for details.
Treasury – ASIC report on grandfathered conflicted remuneration and related ATO update
On 16 July 2021, Treasury released a report prepared by ASIC titled ‘Ending Grandfathered Conflicted Remuneration’. The report ‘sets out ASIC’s findings as to the steps taken by industry participants from 1 July 2019 to 31 December 2020 to…[e]nd the payment of grandfathered conflicted remuneration…[and] pass previously grandfathered benefits on to product holders’.
In an associated news update, the ATO has advised that any conflicted remuneration amounts received by product holders based on what the financial adviser would have been paid may be ‘assessable as ordinary income’. This will depend on how the amount is paid to the product holder.
