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December 30, 2013

UBS gives EU over BBSW

ASIC has accepted an enforceable undertaking (EU) from UBS AG (UBS) in relation to potential misconduct involving the Australian Bank Bill Swap Rate (BBSW).

In July 2012, UBS reported to ASIC that it had found evidence of conduct between 2005 and 2011 seeking to influence its BBSW submissions, based on how the submissions may benefit UBS' derivatives positions.

The discovery was made following its global internal investigation relating to its LIBOR conduct.

In February 2013, UBS withdrew from the BBSW submissions panel.

At ASIC's request, UBS engaged an independent expert to conduct a review of BBSW submissions. The expert found that any market impact was insignificant.

UBS will also make a voluntary contribution of $1 million to fund independent financial literacy projects in Australia.

Since 27 September 2013 the BBSW has been electronically calculated, and the panel banks no longer make submissions. The BBSW calculation is different from the LIBOR calculation.

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Posted 30th December 2013 by David Jacobson in Corporations Act, Financial Services

Charities Act to commence on 1 January 2014

The Government's Bill to delay the commencement of the Charities Act 2013 by nine months, from 1 January 2014 to 1 September 2014 has not been passed by the Senate.

The Charities Act will commence on 1 January 2014: Background.

It will apply a new definition of "charity" which will be used for income tax, GST and fringe benefits tax concessions.

The Australian Charities and Not-for-profits Commission (the ACNC) will apply the statutory definitions when determining whether to register an entity as a charity and whether a registered charity is still eligible to remain registered.

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Posted 30th December 2013 by David Jacobson in Charities

Bridgecorp decision reversed: Directors’ insurance

in Steigrad v BFSL 2007 Ltd & Ors [2013] NZSC 156 ("Bridgecorp") the New Zealand Supreme Court decided that when a directors and officers insurance policy which contained a single limit of liability covering both liability and defence costs claims the third party claims have priority over defence costs if the limit is insufficient to satisfy both claims.

The Supreme Court reversed the Court of Appeal decision (discussed here).

Directors should seek to have their defence costs insurance in a separate policy.

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Posted 30th December 2013 by David Jacobson in Corporate Governance

Gambling reforms to commence on 1 February 2014

The Government's Bill to repeal parts of the National Gambling Reforms has not been passed by the Senate (Background).

A $250 a day ATM withdrawal limit will apply for gaming venues (other than casinos) from 1 February 2014.

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Posted 30th December 2013 by David Jacobson in Financial Services

Domestic systemically important banks in Australia

APRA has released an information paper on its framework for dealing with domestic systemically important banks (D-SIBs) in Australia.

Banks identified as D-SIBs have higher loss absorbency (HLA) capital requirements.

Based on size, interconnectedness, substitutability and complexity, APRA has determined that the following authorised deposit-taking institutions are D-SIBs:
•Australia and New Zealand Banking Corporation
•Commonwealth Bank of Australia
•National Australia Bank
•Westpac Banking Corporation.

The HLA capital requirement for D-SIBs is intended to reduce the probability of failure compared to non-systemic institutions, reflecting the greater impact a D-SIB failure is expected to have on the domestic financial system and economy.

The D-SIB framework in Australia focuses only on the larger banks. Other authorised deposit-taking institutions (ADIs), such as smaller banks, credit unions and building societies lack the scale and scope of banking activities to be considered within a D-SIB framework.

The D-SIB framework will come into effect from 1 January 2016.

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Posted 30th December 2013 by David Jacobson in Financial Services

December 23, 2013

FOFA changes announced

The Assistant Treasurer has announced proposed amendments to the Future of Financial Advice (FOFA) legislation.

The Government's amendments will include:

  • removing the opt-in requirements so that advisers no longer need to seek their client’s agreement every two years
  • restricting fee disclosure statements to new clients from 1 July 2013
  • removing 'catch-all' from the best interests duty of advisers
  • amending the best interests duty to explicitly allow for the provision of scaled advice to enable consumers to receive "one-off advice" from financial advisers
  • exempting general advice from conflicted remuneration: the ban on conflicted remuneration only applies to personal financial advice
  • amending grandfathering: advisers can move between licensees whilst continuing to access grandfathered benefits.

ASIC's response

ASIC will not take enforcement action in relation to the specific FOFA provisions that the Government is planning to repeal. For example, ASIC will not take action for breaches of current section 962S of the Corporations Act 2001, which requires fee disclosure statements to be provided to retail clients with ongoing fee arrangements entered into before 1 July 2013.

ASIC will review and consult on its regulatory guides on FOFA once the proposed amendments have been made.

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Posted 23rd December 2013 by David Jacobson in Corporations Act, Financial Services, Future of Financial Advice Reforms

APRA’s finalises standard on Basel III liquidity

The Australian Prudential Regulation Authority (APRA) has released its final position on implementation of the main elements of the Basel III liquidity reforms for authorised deposit-taking institutions (ADIs) in Australia.

Prudential Standard APS 210 Liquidity and Prudential Practice Guide APG 210 Liquidity come into force on 1 January 2014.

An ADI must actively manage its intraday liquidity positions and risks in order to meet payment and settlement obligations on a timely basis under both normal and stressed conditions.

The Basel III liquidity reforms involve two new quantitative measures: a 30-day Liquidity Coverage Ratio (LCR) to address an acute stress scenario and a Net Stable Funding Ratio (NSFR) to encourage longer-term funding resilience.

Retail deposits are divided into ‘stable’ and ‘less stable’ portions of funds.

Certain types of deposits are considered more likely to be withdrawn in a time of stress. These include high-value deposits (i.e. deposits above any government deposit guarantee limit), deposits from customers who do not have other established relationships with an ADI that make the deposit withdrawal unlikely, deposits where the internet is integral to the design, marketing and usage of the account (on-line accounts) and deposits with promotional interest rates (heavily rate-driven).

Cash outflows related to fixed or term deposits with a residual maturity or withdrawal notice period of greater than 30 days will be excluded from LCR calculations if the depositor has no legal right to withdraw deposits within the 30-day horizon of the LCR, or if early withdrawal results in a significant penalty that is materially greater than the loss of interest.

If an ADI allows a depositor to withdraw such deposits despite a clause that says the depositor has no legal right to withdraw, the entire category of these funds must be treated as demand deposits.

However, an ADI can allow depositors experiencing hardship to withdraw their term deposits without changing the treatment of the entire pool of deposits.

The LCR will become effective from 1 January 2015. The NSFR will become effective from 1 January 2018.

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Posted 23rd December 2013 by David Jacobson in Financial Services

Financial System Inquiry terms of reference finalised

The Treasurer has announced the final terms of reference for the Government’s Financial System Inquiry.

The Inquiry panel will consist of Mr David Murray AO (Chair), Professor Kevin Davis, Mr Craig Dunn, Ms Carolyn Hewson AO and Dr Brian McNamee AO.

Submissions will open in early January and close at the end of March 2014.

The Inquiry will publish an interim report in mid-2014 setting out initial findings.

A final report is to be provided to the Treasurer by November 2014.

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Posted 23rd December 2013 by David Jacobson in Financial Services

December 20, 2013

Privacy Regulations amended: credit reporting provisions

Privacy Regulation 2013 was registered on 17 December 2013. It updates and consolidates the Privacy Regulations with changes made to implement the Privacy Amendment (Enhancing Protection) Act 2012 which commences on 12 March 2014.

The main changes relate to credit reporting as a result of amendments to Part IIIA of the Privacy Act.

Regulation 6 – Consumer credit liability information
This Regulation prescribes the terms or conditions of the consumer credit for the purposes of the definition of consumer credit liability information in paragraph 6(1)(e) of the Act. These are:

(a) how the principal and interest on the consumer credit are to be paid (with the regulation specifying that payments be classified as either principal and interest, principal plus interest with a residual balloon, or interest only);

(b) whether the term of the consumer credit is fixed or revolving;

(c) if the term of the consumer credit is fixed – the length of the term;

(d) whether the individual is a guarantor to another individual is in relation to that particular line of credit of the other individual;

(e) whether the consumer credit is secured or unsecured; and

(f) any variation that may be made to items contained in the above paragraphs (a) to (e).

Regulation 10 – Meaning of credit provider
Regulation 10(2) excludes from the definition of credit provider under subsection 6G(6) of the amended Privacy Act any organisation or small business operators acting in the capacity of a current or prospective landlord in relation to the individual with whom an organisation or small business may be transacting. Any landlord which receives rent in arrears is therefore excluded from the definition of a credit provider.

Regulation 11 – Meaning of credit reporting business
This Regulation excludes from the definition of credit reporting business under subsection 6P(4) of the amended Privacy Act those businesses which provide personal information to a credit provider for the purposes of verifying an individual’s identity or validating other information relating to the individual’s financial position (such as real property assets) provided by an individual to a credit provider.

Regulation 12 – Meaning of repayment history information
This regulation specifies the circumstances in which an individual has not met an obligation to make a monthly payment that is due and payable, pursuant to subsection 6V(2) of the amended Privacy Act. The Regulation provides that where an individual misses any or all repayments due in a month, irrespective of the actual payment cycle for that obligation, then the individual is taken to have missed a payment. The intention of this section is to ensure that there is only one report each month per credit account of an individual’s repayment history information.

Regulation 22 – Transitional
The Regulation provides that information requests that are being processed on or before the commencement date of the Privacy Amendment Act may be processed under the existing Part IIIA of the Privacy Act up to, and including, 31 March 2014.

More about the Privacy Amendment Act

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Posted 20th December 2013 by David Jacobson in Compliance, Financial Services, National Credit Code, Privacy

ATO clarifies SMSF limited recourse borrowing arrangements

The ATO has released a draft legislative instrument regarding trusts formed to hold property for limited recourse borrowing arrangements.

The legislative instrument will potentially exclude an investment in a related trust held by an SMSF as a required part of an Limited Recourse Borrowing Arrangement from being an in-house asset of the SMSF.

If formalised, the instrument will apply retrospectively, from 24 September 2007 – the date from which SMSF Limited Recourse Borrowing Arrangements were permitted.

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Posted 20th December 2013 by David Jacobson in Financial Services, Superannuation, Tax
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