Reporting entities must make sure that AUSTRAC have up to date information about your company and its earnings to ensure that the appropriate contribution amount is applied.

Does this apply to me?
The AUSTRAC Industry Contribution applies to reporting entities that were enrolled with AUSTRAC on the census day – 1 July each year. However certain entities will not be required to a levy.

How is it calculated?
The charging model to calculate the industry contribution has been altered. The contribution amount will vary depending on your circumstances and will be calculated using:
• A Transaction Reporting Component: this is measured by the number of transaction reports and the value of transaction reports; and
• An Earnings Component: this measure is calculated on your earnings and varies depending on the type of business you operate, where you are incorporated and whether you are part of a larger group of companies.

What do I need to do?
As a reporting entity, you must ensure your AUSTRAC Business Profile is updated by 27 February 2015. The industry contribution invoice will be sent during April 2015.

For further information
For more information about AUSTRAC industry contribution and how to calculate the earning components, please visit their website.

Please contact us if you have any question at 02 8324 5300 or enquiries@certaintycompliance.com.au.

What does this really mean?

It is important to note that this is a ‘no action’ position rather than a change of law. ASIC has noted that a legal risk remains and that this does not affect private rights of third parties to take action. ASIC has also warned that it will take action against providers who miscategorise clients, e.g. under the general test as a wholesale client without an accountant’s certificate.

Some aspects remain unclear

Uncertainty still remains:
• as to when a service is “advice that relates to superannuation”. If the financial service relates to a superannuation product, the $10 million net asset test is the only applicable test.
• on the calculation of net assets for the general test. For example, whether the assets of the SMSF can be combined with the assets of the trustee to meet the general test.
• on which tests apply when the trustee is not a single individual trustee. For example, when the trustee is a corporate trustee or when there are more than one individual as trustee and one individual does not meet the general test. ASIC also has not clarified if the general test or large transaction test can be used in these circumstances. It would be prudent for advisers and product providers to seek legal advice when the providing services to SMSF with different control structures.

For further information

Certainty can help you meet all aspects of your AFSL obligations. Please contact our office on (02) 8324 5300 or enquiries@certaintycompliance.com.au.

As foreshadowed in their announcement just before Christmas, proposed amendments include:

• Conflicted remuneration: the ban will only apply to Personal Advice. General Advice will be exempt from the ban therefore significantly limiting the scope of this requirement. The Government also aims to clarify that the Execution Only exemption applies in circumstances where the benefit is paid directly by the client or by another party where the benefit is given at the direction of the client and with the client’s clear consent.

•  Scaled advice: clients and advisers will be explicitly allowed to agree on the scope of financial advice to be provided. The existing best interests duty requires that advisers make investigations into their client’s broader objectives, financial situations and needs before providing scaled advice. Under the new regime, advisers need only investigate the client’s objectives, financial situation and needs that are relevant to the scaled advice to be provided.

•  Opt-in:  remove altogether the requirements for clients to opt-in to ongoing fees arrangements on a regular basis.

•  Fee Disclosure Statements:  remove the retrospective application so that the requirement only applies to clients that have signed-up post – 1 July 2013. This will significantly reduce the administrative burden for businesses to provide Fee Disclosure Statements to pre 1 July 2013 clients.

•  Best Interest Duty: remove the catch-all provision (s961B(2)(g)) from the safe harbour approach. This leaves the initial six steps that advice providers can follow to evidence they have acted in the client’s best interest. The existing legislation left a corridor of uncertainty around the lengths required to satisfy this obligation.

•  Grandfathering: amend grandfathering to allow for adviser movements between licensees

In general, these changes will come into effect from the date the Act is given Royal Assent. Specific timings are outlined in the Draft Explanatory Memorandum.

Your opportunity to submit comments on the proposed changes

You have a short window of opportunity to view and comment on the proposed amendments.  Submissions must be in writing and made by the 19^th February 2014 to either Email: futureofadvice@treasury.gov.au or Postal address: General Manager, Retail Investor Division, The Treasury, Langton Crescent, PARKES ACT 2600.

The Future of Financial Advice website contains a copy of the proposed legislation and explanatory statements.

What happens next?

Assuming all goes to plan, the proposed changes will go through Parliament in the 2^nd and 3^rd quarters of 2014.  Once the amendments are passed, ASIC will go through the process of industry consultation and updating guidance. In the meantime, ASIC has indicated that they “will not take enforcement action in relation to the specific FOFA provisions that the Government is planning to repeal”. However, as noted in the Explanatory Memorandum, “ASIC’s stance does not remove a client’s right to take private action against a provider in the event they feel they are disadvantaged”.

In this case, Citigroup paid a $40,000 fine for an incident that occurred in late 2011 involving order placed on the ASX24 Market by a client with Direct Market Access. The client placed an order that was executed well away from the published daily settlement price. Citigroup’s trading system should have had filters and warnings in place to identify that the order was too far away from the current market. The order should have been rejected.

Following its investigation, the MDP believed that Citigroup breached Rule 2.2.1(1)(b) of the Market Integrity Rules for the ASX24 Market. This rule requires participants to demonstrate ‘prudent risk management procedures’. In particular, participants should establish and document limits for orders, positions and maximum price changes. Limits must be applied to orders for both client and house accounts.  See full details of ASIC’s announcement here.

What does this mean for me

Financial markets are dominated by technology and ASIC has demonstrated its focus on ensuring that trading is fair and orderly. There are a number of Market Integrity Rules (ASX, Chi-X and ASX24) that require participants to maintain control of their trading systems. For participants of these markets, it is important that you consider:

• Does your trading system have adequate filters and controls in place?
• Have you regularly reviewed and tested these filters and controls?
• Are your procedures documented and current?
• Do you have appropriate security and change management arrangements in place?

AOP System Annual Review and Notification

You should also be aware that a new Market integrity Rule is taking effect this year. Participants of the ASX and Chi-X markets must complete an Annual Review of their AOP Systems by the 1^st November each year. Participants must then make an Annual Notification to ASIC with respect to their compliance with the Market Integrity Rules.

Regulatory guidance and supervision

The Citigroup incident is the 21^st Infringement Notice issued by ASIC since they assumed control of market supervision in August 2010. Whilst this is the first Notice for breach of this particular Market Integrity Rule, many previous Notices were for breaches of similar rules on the ASX Market. For example, we have seen several breaches for failing to ensure that:

• Markets remain fair and orderly (MIR ASX 5.9.1)
• AOP systems have appropriate automated filters in place so as to avoid interfering with market integrity (MIR ASX 5.6.1)

ASIC released guidance on risk management for ASX24 participants in August 2013. Regulatory Guide 250 was issued soon after the release of new and updated Market Integrity Rules for the ASX24 Market. One of the new rules extended existing risk management requirements to house accounts as they previously only covered dealing for client accounts.

mFund is a facility jointly operated by ASX Ltd “ASX” and ASX Settlement Pty Ltd “ASX Settlement” where requests for the issue or redemption of interests in unlisted managed investment schemes can be made, and holdings recorded through CHESS.

Class Order (CO 13/1621) exempts Responsible Entities “REs” of Managed Investment Schemes available through the mFund from only issuing interests in response to an application form that was included in or accompanied a product disclosure statement “PDS”. REs will generally be allowed to issue on the basis of an electronic message through mFund indicating that the investor has been given the latest PDS for the scheme.

The sender of the electronic message must be an Australian Financial Services licensee or an Authorised Representative and must not send an electronic message unless the investor has been given the latest PDS for the scheme.

Do you hold an Australian Financial Services License? If not, please contact Certainty on 02 8324 5300 or email to enquiries@certaintycompliance.com.au.

Here’s a short list of compliance tasks that you should have underway before the holiday season begins:

Compliance policies and implementation

In your AFS licence application your directors made significant representations to ASIC about your compliance obligations and how you intend to meet these. You are expected to have documented policies and procedures in place. Time to get writing and implementing!

Auditor appointment

Did you appoint an auditor during the licensing process? If not you’ve got one month to do that from the date your licence was granted and to notify ASIC.

Advertising

As many carbon products are financial products, you should also take particular care with advertising to ensure it is not misleading and deceptive and/or that you are not inadvertently providing financial services that you are not licensed to provide. ASIC has published a very useful guide to good advertising principles (ASIC RG 234) and we recommend that you read this. Ensure your staff know your procedure for approving advertising before it is released publicly. Oversight by compliance or legal of this approval process is highly recommended.

Remember: advertising includes the traditional media of print, television, radio and bill boards as well as websites, emails and social media (e.g. facebook, twitter, linkedin).

Austrac registration and AMLCTF Program

Carbon products and derivatives are also regulated by AUSTRAC. Before you complete a transaction (or arrange for someone to complete a transaction), you must have a Board approved AML/CTF Program in place. You also need to register with AUSTRAC.

If you are an existing AFS licensee, a reminder that we are coming up to the end of the AML/CTF year and it is time to start preparing for annual compliance reporting in March 2013. Have you had your AML/CTF Program independently reviewed recently?

Training conditions

ASIC might require your Responsible Managers to undertake a short course on FSR regulation and AFS licence compliance obligations prior to or as a condition on granting the AFS licence. Certainty offers appropriate courses through a variety of delivery modes. Ask us for details.

Need help? Please give us a call to discuss on 02 8324 5300 or email enquiries@certaintycompliance.com.au

ASIC have recently stated in two new fact sheets for Carbon Farming Initiative that a “forward sale of ACCUs for settlement in the future is classed as a derivative”. Unless you are covered by an exemption, you must hold an AFS licence or be an authorised representative of an AFSL holder with appropriate authorisations before providing financial services (advice, deal, make a market etc) for carbon products and derivatives before providing any financial services in relation to the forward sale of any of the ASIC regulated carbon products.

New AFS Licence applicants

If you are a new AFS licence applicant that registered with ASIC prior to 1 July 2012, lodged your full application before 31 October 2012 and have not yet received your AFS licence, you must not provide financial services in derivatives (including forward sales) until you have been granted your AFS Licence. You can continue providing the financial services that you registered for until 31 December 2012. Unless you are covered by an exemption, you cannot provide any additional financial services or financial products or client type in the interim. From 1 January 2013, all interim relief expires.

If you did not register or if you missed the 31 October deadline to submit your full AFS Licence application, then you currently have no transition relief. This means you must first obtain an AFS Licence or become an authorised representative of an appropriately licensed ASF licence holder before providing financial services.

If you did not lodge your application under the same entity name you registered in, you do not have the benefit of transition and must wait until your AFS Licence is granted before providing financial services.

All new AFS Licence applicants should check their websites and advertising to ensure that they are not inadvertently providing any unlicensed financial services.

Need help? Please give us a call to discuss on 02 8324 5300 or email enquiries@certaintycompliance.com.au

Australian financial services licensing and the Carbon Farming Initiative Fact Sheets:

A fact sheet for advisers and project developers
A fact sheet for farmers and land managers

Certainty Compliance can provide assistance in submitting your application to ASIC, including advice on the optimal authorisations you will require to trade in carbon emissions units.

Please contact Certainty on 02 8324 5300 or enquiries@certaintycompliance.com.au

Last 2 days to register for carbon trading. Register and you can provide advice and transact in carbon with Australian clients from 1 July. Miss this deadline and you must wait until you obtain an AFSL, a process that will take several months. Almost 100 businesses are registered to date.

ASIC has published a further guide on licensing for carbon, INFO 156

If you are at still thinking about licensing, contact us today on 02 8324 5300 or email us at enquiries@certaintycompliance.com.au

On Monday ASIC announced a four month transition period for AFS licensing for emissions units from 1 July to 31 October 2012. Registration is an interim step before obtaining an ASF licence or a variation to an existing AFS licence. Financial services compliance obligations commence 1 July 2012.

Key points:

Training

Emissions units are ‘Tier 1’ products for ASIC Regulatory Guide 146 Licensing: Training of financial product advisers (RG146) purposes. Advisers to retail clients will have 18 months until 31 December 2013 to complete the training requirements. RG146 has been updated to include a table of specialist knowledge requirements for regulated emissions units.

Financial

The current financial requirements of ASIC Regulatory Guide 166 Licensing: Financial requirements will apply to emissions units. For most emissions trading AFS licensees this will involve meeting the base level requirements (remaining solvent at all times, having total assets exceeding total liabilities, and sufficient cash to meet projected needs over at least the next three months).

In certain limited circumstances, there may be additional requirements. For example, if AFS licensees:

• hold client money or property over $100,000, they are required to hold $50,000 in surplus liquid funds
• issue and make a market in derivatives and/or foreign exchange, they are required to hold adjusted surplus liquid funds
• operate a managed investment scheme, they are required to meet NTA requirements

Licensing

ASIC has updated ASIC Regulatory Guide 236 Do I need a licence to participate in carbon markets? (RG 236) for the transition period and training and financial requirements.

You must be registered by 30 June to provide financial services in emissions units from 1 July 2012.

Financial services compliance obligations start 1 July 2012. You need to have compliance policies and procedures in place and your staff prepared.

You must have your AFS licence application submitted before 31 October 2012 and granted by 31 December 2012 to provide financial services from 1 January 2013.

Key dates:

• 1 May 2012: Registration application period commences for those seeking an AFS licence in advising, dealing, making a market and providing a custodial or depository service
• 30 June 2012: Registration application period closes
• 1 July 2012: Your compliance obligations start today. Emissions units are financial products from today and ASIC is accepting AFS licence applications
• 31 October 2012: Last day to submit AFS licence application if you have registered before 30 June and intend to continue to provide financial services
• 31 December 2012: Last day to obtain AFS licence before transition period ends
• 1 January 2013: If you have not obtained your final AFS licence from ASIC, you may not provide financial services in emissions units
• 31 December 2013: Last day for retail AFS licensees to meet the training requirements

How Certainty can help

AFS licensing will be new to many businesses. We’ve been preparing AFS licences since 2002, right from the very beginning. We’ve helped many ‘non-traditional’ financial services businesses such as electricity and commodities obtain AFS licences and meet their ongoing compliance obligations. We work with all sizes of business from the largest global companies to single advisor businesses.

Certainty Compliance can assist by:

• Determining whether your business requires an AFS licence or whether an exemption applies
• Identifying the optimal licensing authorisations for your business and exactly what you need to do to comply
• Completing your registration application
• Building your organisational capacity for licensing including documenting policies and procedures, training your staff and briefing your executive team
• Preparing your AFS licence application and liaise with ASIC on your behalf
• Providing outsourced compliance services to ensure you continue to comply with your obligations once you are licensed

Workshops

Certainty will be conducting workshops in many capital cities to explain the requirements in plain English and to share our experience. We are taking registrations for the following:

• Certainty Compliance Emissions Trading Program: AFS compliance obligations during transition period
• Certainty Compliance Responsible Manager Program: AFS licensing for Emissions Trading

To learn more about our services or to attend one of our workshops:

Click this link to complete a registration form

Alternatively email us on enquiries@certaintycompliance.com.au or telephone (02) 8324 5300.

For further information:

See the full ASIC media release here: 12-84MR ASIC releases policies on adviser training and financial requirements for carbon financial products

Read ASIC Regulatory Guide 146 Licensing: Training of financial product advisers (RG 146) here

Read ASIC Regulatory Guide 166 Licensing: Financial requirements (RG 166) here

Read ASIC Regulatory Guide 236 Do I need a licence to participate in carbon markets? (RG 236) here