MEMBERSHIPEVENTS

EDUCATION POLICY &

REGULATORY ISSUES

Stockbrokersand Financial Advisers MONTHLY

OCTOBER 2019

www.stockbrokers.org.au

Government proposes to grant additional

powers to ASIC

p. 2 Stockbrokers and Financial Advisers Monthly | October 2019

CONTENTS

Inside...

3 Message from the CEO

5 AFCA to go ahead with naming of Licensees

5 ASIC consults on Product Intervention – Binary Options and CFDs

6 Government proposes to grant additional powers to ASIC

8 Committee News

10 ASIC’s priorities for supervising market intermediaries in 2019–20

11 Super Snippets: Annual returns deadline

13 Continuing Professional Development: October – December 2019

Stockbrokers and Financial Advisers Association Limited ABN 91 089 767 706

(address) Level 6, 56 Pitt Street, Sydney NSW 2000(tel) +61 2 8080 3200 (fax) +61 2 8080 3299 (email) info@stockbrokers.org.au

www.stockbrokers.org.au

DISCLAIMER: This Newsletter is provided solely for the information of members of the Stockbrokers and Financial Advisers Association. It does not constitute advice. The Stockbrokers and Financial Advisers Association nor any of its officers or agents accepts no liability or responsibility for the accuracy, reliability or completeness of any information contained in the Newsletter, and readers should rely on their own enquiries and analysis in making any decision or taking any action that affects them.

www.stockbrokers.org.au p. 3

That’s because until such time as the extension passes in Parliament, the original timetable stands. SAFAA is obviously advocating for the Oppo-sition and crossbench Senators to support the extension. We will make the case that the extension balances the impact of the reforms against maintaining the ongoing availability, quality and affordability of advice and also helps individuals deal with the needs of their work, their family demands and a substantial amount of study, in what had been a short time-frame. However, if you already have plans in place, it may be wise if you stick to them.

Recognition of experiential learningOne of the biggest challenges in the introduction of the FASEA require-ments for older, experienced advisers without university qualifications is the lack of recognition of experiential learning. Recent research from Rice Warner shows that over the next 20 years only 30 per cent of Australians will rely on the full age pension with another 30 per cent relying on the part age pension and 40 per cent fully self-reliant. This means that over the next two decades 70 per cent of Australian retirees will need to be involved in share investing in order to generate either a part or full retirement income.

Access to investment advice will be key to ensuring Australians have sound retirement incomes. More importantly, access to advisers who have lived through market shocks will be essential to protecting those retirement incomes, as experience is key to understanding the risks and returns in the marketplace.

It is important to know that there is a serious solution in place that recognises experiential learning. Our partnership with Western Sydney University also includes the Chal-lenge Assessment. Incredibly cost effective at $795, eligible candi-dates can gain credit for existing

knowledge and experience, so you can fast-track your path to the full qualifications you now need.

The Challenge Assessment will be available for the following units: Financial Adviser Communication Skills, Financial Products and Mar-kets, Superannuation, Planning for Retirement, Derivatives and Funds Management & Portfolio Selection.

Candidates are able to undertake up to 50 per cent of the course using Challenge Assessments. That means two Challenge Assessments in the Graduate Certificate, up to four in the Graduate Diploma and up to six in the Masters, meaning you can complete your Graduate Diploma in only two quarters. At $795 – the good news is that it is also less expensive than undertaking units of study.

This is the only one of its kind in Australia.

Code MonitoringOne area of considerable concern is the timing in relation to ASIC’s ap-proval of Code Monitoring Australia and the Code Monitoring framework being implemented at this moment for the Professional Standards leg-islation (SAFAA is a Cooperating Association in the Code Monitoring Australia consortium).

ASIC has advised approval will come at the end of October. Advisers are required to nominate the Compli-ance Scheme that will cover them by 15 November and by 1 January 2020, all advisers must be bound be the Code of Ethics and covered by a Compliance Scheme. The timing, given that a Code Monitoring body has not yet been approved, is cur-rently unworkable.

We are waiting to hear if the gov-ernment will defer the start of the scheme to allow for all processes to be put in place. Attached to this is the need to have clarification as to whether the government intends to act on the recommendation to estab-lish a single body for the registration and disciplining of financial advisers

and what this would mean for Code Monitoring Australia.

Retirement Income ReviewThe government has announced the terms of reference for the Retirement Income Review. The terms are broad, which is positive, allowing the review to ensure that the interaction of superannuation, taxation, Age Pen-sion means testing and the broader retirement income system supports Australians to plan ahead for retire-ment over decades.

The review will look at the three pil-lars of the existing retirement income system, being the Age Pension, com-pulsory superannuation and voluntary savings. It will cover the current state of the system and how it will perform in the future as Australians live longer and the population ages.

As a founding member of the Alli-ance for a Fairer Retirement System, SAFAA supports policy settings that provide for fairness, adequacy and sustainability. Recent research from Rice Warner shows that over the next 20 years only 30% of Australians will rely on the full age pension with another 30% relying on the part age pension and 40% fully self-reliant. This means over the next two de-cades 70% of Australian retirees will need to be involved in share investing in order to generate either a part or full retirement income. Ac-cess to investment advice will be key to ensuring Australians have sound retirement incomes.

A consultation paper will be re-leased in November 2019 and the final report provided to Government by June 2020. n

OCTOBER 2019 MESSAGE FROM THE CEO

Judith Fox, CEO

Don’t let the news of the extension of time to complete the

FASEA exam and meet FASEA requirements derail your

plans as to how best to manage the new requirements.

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12 & 13 May 2020 | Hilton Sydney

ASIC HAS ANNOUNCED that it has approved AFCA’s

proposed rule change enabling it to publish the name of the Licensee involved in a Determination.

Members might recall that AFCA consulted on this proposal in May this year. SAFAA made a submission opposing the change on a number of grounds, including:• The rationale for introducing Exter-

nal Disputes Resolution require-ment was to provide quick and low cost dispute resolution for retail clients of licensees. It was not the

intention that a separate Court system be introduced.

• EDR is not unlike dispute resolu-tion clauses in contracts, under which parties agree to have their disputes resolved by a private body or adjudicator, rather than by resorting to the courts. Such disputes are also not made public.

• There is the potential for investors to draw unbalanced inferences from the fact that Licensee A, for example, which may have 500,000 on-line clients might be publicly named four times in one

year, compared to a small firm with fewer clients that might only be named once.

• Anonymity was always meant to be the “trade-off” against the fact that EDR decisions can be made on the basis of “fairness” and without regard to legal principles, and that AFCA has a limited abil-ity to compel production of all of the evidence and documents that might be relevant to a case (unlike a Court). n

AFCA to go ahead with naming of Licensees

IN AUGUST, ASIC issued Con-sultation Paper CP 322 setting

out its proposals to utilise its new Product Intervention powers in re-lation to Binary Options and OTC Contracts for Difference (“CFDs”).

It is most unlikely that SAFAA members would deal in Binary Op-tions, and not many are likely to be active in the CFD space. CP 322 is interesting however in illustrating how ASIC proposes to go about us-ing the new powers.

The Product Intervention power and the Design and Distribution obli-gations were part of legislation which came into effect on 6 April 2019.

The legislation included giving ASIC significant powers in relation to products that are, or are likely to be, available to retail clients. ASIC is able to utilise the Product Interven-tion powers where it is satisfied that a product has resulted in significant detriment to retail clients.

In relation to Binary Options, ASIC has proposed that it will ban the issue and distribution to retail clients.

In relation to OTC CFD’s, ASIC is

proposing to make an intervention order that:(a) imposes CFD leverage ratio

limits (see minimum Initial Margin requirements below).

(b) implements a standardised ap-proach to the automatic close-out of retail client positions. A position must be closed out if the client’s funds in their CFD trading account fall to less than 50% of the total initial margin required for all of their open CFD positions on that account. The CFD issuer must, as soon as market condi-tions allow, close out one or more open CFD positions held by the retail client.

(c) protects against negative bal-ances. The terms of a CFD of-fered to a retail client must limit the retail client’s losses on CFD positions to the funds in that retail client’s CFD trading account;

(d) prohibits the offer of certain in-ducements in relation to CFDs. A person must not, in the course of carrying on a business, give or offer a gift, rebate, trading credit or reward to a retail client

or a prospective retail client as an inducement to open or fund a CFD trading account or trade CFDs; and

(e) requires enhanced transparency of CFD pricing, execution, costs and risks. This includes real-time disclosure to a retail client, in any trading platforms maintained by the CFD issuer, of the retail client’s total position size in monetary terms for all open CFD positions for the retail client’s CFD trading. Also required will be prominent risk warnings to be given to retail clients.

The CFD Initial Margin require-ments proposed by ASIC are:• 20:1 for CFDs over currency pairs

or gold; • 15:1 for CFDs over stock market

indices;• 10:1 for CFDs over commodities

(excluding gold);• 2:1 for CFDs over crypto-assets;

andASIC has invited interested parties

to comment on the proposals before 1 October 2019. n

ASIC consults on Product Intervention – Binary Options and CFDs

NEWS | POLICY & REGULATORY ISSUES

p. 6 Stockbrokers and Financial Advisers Monthly | October 2019

BRIEFLY, the following chang-es are being put to Federal

Parliament:

• Amending the Telephone Intercep-tion Legislation, to give ASIC the powers to receive information from lawfully intercepted telephone communications and to use it for an investigation that ASIC is au-thorised to conduct into a serious offence. ASIC is not itself being granted the status of an “intercep-tion agency“ – rather, it will still need the information to be given to it by an Australian police force, ASIO or anti-corruption bodies.

• Changes to ASIC Banning order powers. ASIC will be:

1. Given expanded powers to make a banning order, including:

− to ban a person from perform-ing the functions of an officer of an entity that carries on a financial services business;

− to ban a person from control-ling an entity that carries on a financial services business;

− to ban a person from perform-ing a specific financial service in specified circumstances.

2. Able to have regard to ex-panded criteria in deciding whether to make a banning order, including:

− A conviction for any offence in the last 10 years;

− Having been an insolvent, or been an officer of a corpora-tion that was unable to pay its debts;

− Having been banned from providing credit or been disqualified from managing a corporation;

− Being linked to a refusal or failure to comply with an AFCA determination on more than one occasion.

• Expanded powers to apply for ASIC to apply for a search warrant.

• Changes to the licensing provi-sions, including:

− Replacing the “good fame and character” test with a “fit and proper” test;

− The power for ASIC to request information from the applicant for a licence;

− The power for ASIC to refuse to grant the license if the Applicant provides information that is false or misleading;

− A requirement to notify ASIC within 30 days of a change of control of the licensee. n

Government proposes to grant additional powers to ASIC

POLICY & REGULATORY ISSUES | NEWS

SUBMISSIONS | Members can view submissions at www.stockbrokers.org.au/advocacy

POLICY ENQUIRIES | Peter Stepek, Policy Executive, pstepek@stockbrokers.org.au

In August, the Treasurer announced a package of Draft Bills and Explanatory Memoranda designed to make a range of amendments to Legislation to give ASIC additional powers to investigate and enforce corporate misconduct.

The changes arise from the Recommendations of the Final Report of the ASIC Enforcement Review Taskforce in 2017.

LEARNING OUTCOMES

1. Clarity of exam preparation content

2. Realistic expectation of the exam experience

3. Exam strategy tips

4. Case Study analysis techniques

5. Exam essential understanding of: 9 FASEA Code of Ethics 12 x Standards and Values

9 Corporations Act – through relevant Regulatory Guides

9 Anti Money Laundering & Counter Terrorism Red Flags

9 13 x Australian Privacy Principles

9 Tax Agents Service Act 9 Behavioural Finance

WHO SHOULD ATTEND

All Advisers (Investment Advisers/Stockbrokers) planning, or currently registered, to sit an upcoming FASEA National Exam.

CPD

SAFAA’s FASEA National Exam Preparatory Workshop provides 5 FASEA CPD hours in the following categories:

Regulatory compliance and consumer protection 2.5 hours

Professionalism and ethics 2.5 hours

Total 5 hours

Want to start preparing for FASEA’s National Exam?

SAFAA is running a series of workshops nationally to assist our members to prepare for the FASEA exams.

Created to get you exam-ready, this practical, focused workshop is designed to match your learning to the FASEA exam. We are keen to give you the best chance possible of sitting the exam successfully.

REGISTER TODAY www.stockbrokers.org.au

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PerthWednesday 27 November 9.30am to 2.30pm

AdelaideWednesday 4 December9.30am to 2.30pm

FASEA National Exam Preparatory Workshop

p. 8 Stockbrokers and Financial Advisers Monthly | October 2019

Committee NewsRecent and upcoming meetings of the Stockbrokers and Financial Advisers Association – Committees, Working Groups and Advisory Panels:

Management Committee Meeting, Thursday 10 October 2019Chair: Judith Fox, Stockbrokers and Financial Advisers Association

Profession Committee Meeting, Monday 14 October 2019Chair: Andrew Fleming MSAFAA, Morgans Tynan Partners

Master Practitioner Member MSAFAA application approved:• Angus Bligh

Practitioner Member MeSAFAA applications approved:• Barri Steer• Christopher Wright

Affiliate Member AfSAFAA application approved:• Grant Augustin

POLICY & REGULATORY ISSUES | NEWS

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p. 10 Stockbrokers and Financial Advisers Monthly | October 2019

ASIC’s priorities for supervising market intermediaries in 2019–20

POLICY & REGULATORY ISSUES

ASIC RECENTLY published its priorities for supervising market

intermediaries in 2019–20, based on the strategic priorities in the ASIC Corporate Plan 2019–23. ASIC is focusing on:

• high-deterrence enforcement action

• improv ing governance and accountability

• protecting vulnerable consumers.

To achieve these priorities, the most significant pieces of work ASIC will undertake include:

1. Fixed income, currencies and commodities (FICC) markets – targeted transaction reviews, en-hanced oversight of bank bill mar-kets, expansion of ASIC’s program of onsite reviews, compliance with

foreign exchange (FX) and BBSW court enforceable undertakings, review of allocation practices for debt capital markets transactions, monitoring the impact of global LIBOR transition, and OTC trade reporting.

2. Enhanced supervision for mar-ket intermediaries – firms that have the most significant market presence, or pose the greatest risk to ASIC’s priorities, should expect a more intensive level of supervision across all areas of their business.

3. Risky OTC derivatives – ASIC plans to protect retail investors by educating them about the risks of trading these products, holding individuals and licensees to account for poor conduct, and

using a range of regulatory and en-forcement powers to raise industry standards.

4. Other priority projects – safe-guarding retail client money, sus-picious activity reporting, CHESS replacing readiness, intermediary resilience and capital adequacy, financial advice by stockbrokers, improving governance, account-ability and compliance, equity capital raising and sell-side re-search, and trade surveillance.

ASIC encourages you to plan for the year ahead by assessing your governance framework against these priorities.

Read more about ASIC’s priorities and significant pieces of work.

A Day in the Life of a Trade Learn the process of buying and selling shares

SYDNEY 15 October 9:00am – 12:00pm | MELBOURNE October 1: 30pm – 4:30pm

www.stockbrokers.org.au p. 11

AFTER THE END of the finan-cial year, SMSF trustees must

ensure all fund records are in order and arrange a financial and compli-ance audit. Once this is complete, they can lodge their annual return which includes a tax return, statutory information about compliance with the SIS Act and details of contribu-tions. Trustees must also pay the annual SMSF levy.

For most funds, the deadline to lodge the annual return for the 2018-19 year is 28 February 2020. Funds that were late lodging the previous year have to lodge by 31 October 2019.

The ATO reported that 91.3% of annual returns for 2017-18 were lodged on time but 66,000 SMSFs were late. A late-lodgement program over the last year to chase up prob-lem funds has brought the number

down to 50,000. The ATO believes failure to lodge annual returns on time is an indicator of deeper problems. Being organised and lodging on time is a fundamental part of the obliga-tions of trustees.

From 1 October 2019, SMSFs that are more than two weeks late on any lodgement date (and have not sought a deferral) will be prevented from accepting rollovers or employer contributions. The ATO will achieve this by amending the Super Fund Look Up system (SFLU).

The SLFU is a public-register of all superannuation funds and shows details about the fund such as its ABN, contact details and its status. The status is extensively used when a fund is being set up but once it is satisfactorily established it will show the status ‘complying’. Currently, the status is changed to ‘Regulation de-

tails removed’ if a newly established SMSF is late lodging its first annual return.

The status ‘Regulation details re-moved’ will now apply for all SMSFs who are late with any lodgement. Once all lodgements are up to date, the SFLU status will revert to com-plying. This is another small step by the ATO to get SMSF trustees to toe the line. n

Our RG146 Superannuation course is highly recommended for anyone who advises on securities in self managed or other superannuation funds. For details of SAFAA’s Superannuation course, please contact SAFAA’s Head of Education, Gillian Gilmore.

SUPER SNIPPETS | EDUCATION

p. 11 Stockbrokers and Financial Advisers Monthly | December 2018

By Peter Grace

Annual returns deadline

Every superannuation fund must lodge an annual return to the ATO. For APRA

regulated funds, this is essentially a tax return. For SMSFs, it’s much more than that.

p. 12 Stockbrokers and Financial Advisers Monthly | October 2019

POLICY & REGULATORY ISSUES

Graduate Diploma in Stockbroking and Financial Advising

Developed jointly by the Stockbrokers and Financial Advisers Association and Western Sydney University’s highly regarded Sydney Graduate School of Management (SGSM), the Graduate Diploma in Stockbroking and Financial Advising is set to become the benchmark qualification that employers, regulators, and clients expect from practitioners who work in the stockbroking and financial advisory industry.

SAFAA ACCELERATOR PROGRAMYou can get the qualifications you need, without having to pause your career with the SAFAA Accelerator Program. SGSM is offering experienced advisers the opportunity to absent themselves from the unit course work and undertake an assessment in two program units.

The program also involves the candidates sitting a Challenge Exam. Interested candidates attend a two hour information session on what is involved in sitting the Challenge Exam.

Challenge Exams are typically three hours in duration and will be held on published day/times in approved venues.

To find out more about the SAFAA Accelerator Program and our Graduate Diploma in Stockbroking and Financial Advising contact education@stockbrokers.org.au or call 02 8080 3200.

www.stockbrokers.org.au p. 13

EDUCATION

OCTOBER

15 Tues 9.00am – 12.00pm Sydney A Day in the Life of a Trade Workshop 3CPD

16 Wed 9.30am – 12.00pm Melbourne Managed Accounts Workshop 3CPD

24 Thurs 1.30pm – 4.30pm Melbourne A Day in the Life of a Trade Workshop 3CPD

29 Tues 9.00am – 12.00pm Sydney Intro to Stockbroking Workshop 3CPD

NOVEMBER

13 Wed 2.30pm – 5.00pm Brisbane Managed Accounts Workshop 3CPD

19 Tues 9.00am – 12.00pm Sydney Market Manipulation & Other Prohibited Conduct Workshop 3CPD

19 Tues 9.30am – 2.30pm Melbourne FASEA National Exam Preparatory Workshop 5CPD

20 Wed 9.30am – 2.30pm Sydney FASEA National Exam Preparatory Workshop 5CPD

21 Thurs 9.30am – 2.30pm Brisbane FASEA National Exam Preparatory Workshop 5CPD

21 Thurs 9.00am – 12.00pm Sydney Insider Trading Workshop 3CPD

27 Wed 9.30am – 2.30pm Perth FASEA National Exam Preparatory Workshop 5CPD

28 Thurs 1.30pm – 4.30pm Melbourne Market Manipulation & Other Prohibited Conduct Workshop 3CPD

DECEMBER

3 Tues 9.00am – 12.00pm Sydney A Day in the Life of a Trade Workshop 3CPD

4 Wed 9.30am – 2.30pm Adelaide FASEA National Exam Preparatory Workshop 5CPD

5 Thurs 1.30pm to 4.30pm Melbourne Insider Trading Workshop 3CPD

12 Thurs 1.30pm – 4.30pm Melbourne A Day in the Life of a Trade Workshop 3CPD

www.stockbrokers.org.au/education

Continuing Professional Development October – December 2019

Managed Accounts: It’s about youA short course providing a comprehensive overview of the different types of managed accounts and the pro’s and con’s of each.

Brisbane | 13 November

12 & 13 May 2020 | Hilton Sydneywww.stockbrokers.org.au

#SAFAA2020

SAFAA 2020

SPONSORSHIP & EXHIBITOR PACKAGES AVAILABLE Please email Anne Shortis

SAFAA 2020 CONFERENCE TOPICSANY SUGGESTIONS? Please email Judith Fox

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