Market Supervision Update Issue 56

Subscribing to the MSU

ASIC publishes the Market Supervision Update (MSU) monthly. It is available for free on the ASIC website and emailed directly to subscribers. The MSU is one of the main ways ASIC communicates regulatory developments and reminders about upcoming obligations to Market Participants.

Participants are required under section 912A of the Corporations Act 2001 to comply with the financial services laws. An important aspect of this is having timely access to important regulatory information. The MSU can assist you to meet this obligation.

ASIC encourages Participants to ensure that all employees, not just their compliance staff, are receiving the MSU. We recommend that you send an email to your employees requesting they subscribe to the MSU today.

Retail Client Adviser accreditation and withdrawal

ASIC reminds Participants of the requirement to promptly accredit or re-accredit Representatives who provide financial product advice regarding options market contracts or warrants to retail clients. Participants are also required to notify ASIC within five business days if a Representative ceases to be an Accredited Adviser of a Participant.

We have found that some Participants have not been accrediting, re-accrediting or withdrawing Representatives in accordance with Part 2.4 ('Retail Client Adviser Accreditation') of the ASIC Market Integrity Rules (ASX Market) 2010 (ASX).

Rule 2.4.1 provides that a Participant must ensure that each of its Representatives who provide financial product advice to retail clients in relation to options market contracts or warrants, holds the relevant accreditation required by the Rules. This means that Representatives must be accredited or re-accredited by ASIC and hold the relevant accreditation type, before providing advice. Failure to ensure that a Representative is appropriately accredited will result in a breach of this Rule and a maximum penalty of $100,000 may be imposed.

Similarly, in accordance with Rule 2.4.17, Participants are required to notify ASIC in writing within five business days if an Accredited Adviser ceases to be a Representative of the Participant that made the application for the person to be accredited. Failure to notify ASIC within the prescribed time-frame will result in a breach of this Rule.

Participants are also encouraged to consider their obligations under Rule 2.1.3, which provides that a Participant must have appropriate supervisory policies and procedures in place to ensure compliance with the Rules. ASIC considers that a contravention of Part 2.4 of the Rules may be indicative of inadequacies in the Participant's supervisory policies and procedures, in breach of Rule 2.1.3.

ASIC register of financial advisers

In 2014 the Government announced the establishment of a public register of financial advisers (Register). The Register will be accessible online from ASIC's MoneySmart website from 31 March 2015.

The Register is an important new tool that will allow consumers to find out information about their adviser. The Register will also give employers a greater ability to assess the suitability of financial advisers and it will improve ASIC's ability to identify and monitor this sector.

The Register will cover all natural persons who provide personal advice on relevant financial products to retail clients. It is intended that the Register will include (among other information):

  • the adviser's name, registration number, status and experience
  • the adviser's qualifications and professional bodymemberships
  • the adviser's licensee and authorised representative (if applicable)
  • what product areas the adviser can provide advice on, and
  • any bans, disqualifications or enforceable undertakings.

To provide licensees with additional time to gather the requisite information, the initial release of the Register in March 2015 will not include the adviser's qualifications, training courses and professional memberships. This information will be added to the register in May 2015.

As part of establishing the Register, ASIC will be changing the way licensees appoint and update details for their authorised representatives (including those that are not financial advisers). The forms licensees currently use in the Australian Financial Services (AFS) licensee and AFS authorised representative portal will be replaced by new transactions available in the ASIC Connect on-line portal. These new transactions will be progressively implemented from March 2015.

Earlier this month, ASIC wrote to AFS licensees and relevant industry associations providing information and guidance about these changes. These letters are available on the dedicated Financial Advisers Register website. An update on the implementation of the Register was also recently published.

Updates to ASIC's OTC derivative trade reporting regime

ASIC has amended the ASIC Derivative Transaction Rules (Reporting) 2013 (Reporting rules) following industry consultation and feedback on Consultation Paper 221: OTC Derivatives Reform: Proposed amendments to the ASIC Derivative Transaction Rules (Reporting) 2013 (CP 221).

The changes to the Reporting rules include:

  • introducing end of day or ‘snapshot' reporting instead of intraday or ‘lifecycle’ reporting as a reporting option, in line with existing transitional relief
  • introducing a ‘safe harbour’ from liability for reporting entities using delegated reporting, if certain conditions are met
  • expanding the ability for foreign firms to rely on foreign reporting requirements in order to comply with the rules, known as alternative reporting, while introducing a requirement for foreign entities who use alternative reporting to designate (or ‘tag’) transactions as being reported under the rules, to enable that information to be made available for financial regulators, and
  • making a number of other technical changes to the Rules reflecting our proposals in CP221 or feedback received.

A media release containing links to the amended rules, explanatory statement and updated Regulatory Guide 251 Derivative Transaction Reporting is available on the ASIC website.

Compliance dates for trade reporting

The following table sets out the key compliance dates for trade reporting for phases 1, 2, 3A and 3B.

Phase

Who covered

Transaction reporting start date

Position reporting start date

Reporting of mark-to-market and barrier information

Reporting of collateral information

1

CFTC registered swap dealers

1 October 2013

1 October 2014

1 October 2014

1 October 2015

2

Other major financial institutions holding $50b or more gross notional outstanding as at 31 December 2013

Rates, credit: 1 April 2014

Other*: 1 October 2014

 

Rates, credit: 1 October 2014

Other*: 1 April 2015

Rates, credit: 1 October 2014

Other*: 1 April 2015

Rates, credit: 1 October 2015

Other*: 1 October 2015

3A

Other financial entities holding $5b or more gross notional outstanding as at 30 June 2014

 

Rates, credit: 13 April 2015

Other*: 12 October 2015

Rates, credit: 19 October 2015

Other*: 18 April 2016

Rates, credit: 2 November 2015

Other*: 2 May 2016

 

Rates, credit: 2 November 2015

Other*: 2 May 2016

 

3B

All other financial entities

 

12 October 2015 (all asset classes)

18 April 2016 (all asset classes)

2 May 2016 (all asset classes)

 

2 May 2016 (all asset classes)

 

* Equities, FX and commodities, excluding electricity derivatives

One-sided reporting for Phase 3B Reporting Entities

On 18 December 2014, the Government announced its intention to implement a one-sided reporting obligation for so-called ‘Phase 3B’ financial entities, i.e. those with an OTC derivatives book size below $5B gross notional outstanding. Draft regulations setting out the details of the one-sided reporting regime are expected to be released for public consultation in March 2015.

ASIC Annual Dinner 2015

The ASIC Annual Dinner on Monday 23 March 2015 in the Hilton Sydney Grand Ballroom is a standalone event within the ASIC Annual Forum program. Delegates can register for the dinner as part of their Forum registration or register for the dinner only. Registrations for the dinner close on 27 February 2014.

During the dinner there will be a keynote address followed by a panel discussion on the theme 'Can the financial industry regulate itself?' The panel will explore the effectiveness of self-regulation and co-regulation of the financial industry, including questions such as:

What does good co-regulation look like? What are the incentives for the financial sector to effectively regulate itself? How do we strike the balance between regulatory oversight and protecting consumers? Should industry bodies be expected to manage multiple roles such as co-regulation and advocacy?

Keynote speaker and moderator

Alex Malley

 

Alex Malley
Chief Executive, CPA Australia

Panel members

Elmer Funke Kupper, Managing Director and Chief Executive Officer, ASX Limited

Dimity Kingsford Smith, Professor of Law, University of NSW

Shane Tregillis, Chief Ombudsman, Financial Ombudsman Service

ASIC enforcement report - July to December 2014

ASIC has released its latest six-monthly enforcement report, detailing outcomes achieved between 1 July 2014 and 31 December 2014. During this period, ASIC achieved 348 enforcement outcomes. This included criminal as well as civil and administrative (e.g. banning or disqualification) actions and negotiated outcomes (including enforceable undertakings).

These outcomes were achieved across the financial services, market integrity, corporate governance and small business areas.

The report highlights ASIC’s ongoing focus on tackling serious corporate fraud and loan fraud and ASIC’s use of civil penalty proceedings to enforce the law.

‘ASIC investigates serious white collar crime. We have recently completed several significant enforcement actions after detecting serious fraud by company directors and officers, committed against the companies they serve and the investing public. These results demonstrate that for those who steal and deceive the consequences are great.’ ASIC Commissioner Greg Tanzer said.

‘Current and future areas of focus for ASIC include loan fraud, financial market benchmark rates, illegal phoenix activity and retail margin foreign exchange trading. We expect to achieve noteworthy outcomes as a result of this work.’

The following statistics on market integrity outcomes have been adapted from Table 1 of Report 421 ASIC enforcement outcomes: July to December 2014 (REP 421). All figures are outcomes per defendant:

Area of enforcement

Criminal

   Civil

     Administrative       remedies

Enforceable undertakings/ negotiated outcomes

Total

Market integrity

       8

             _

          9

            3

      20

Insider trading

       3

 

 

 

       3

Market manipulation

       2

 

 

 

       2

Continuous disclosure

 

 

          1

            1

       2

Market integrity rules

 

 

          8

 

       8

Other market misconduct

      3

 

 

            2

       5

Last updated: 30/03/2021 09:37