Submissions - 2021

Date Title & Summary Topic Area Sent to

Financial Accountability Regime Bill 2021 and Financial Services Compensation Scheme of Last Resort Levy Bill 2021

AFMA's submission mentioned its general support for the final shape of the Financial Accountability Regime noting the reservations about the competitiveness with our regional peers of the settings around deferral, and other more technical concerns such as with the end-to-end product responsibility requirements. On the Compensation Scheme of Last Resort, AFMA noted the need to ensure the scheme does not grow further to become an onerous burden on industry and avoids creating moral hazards for investors.

Regulation Senate Standing Committee on Economics

Response to ASIC Letter to Market Participants Regarding ASIC Report 708

AFMA submitted a response to ASIC's letter to market participants regarding ASIC Report 708 addressing matters in relation to the expectations noted in the Report and the requirement to report to ASIC by mid-February on how firms have implemented or plan to implement these expectations. The submission supported the goals of improving system resilience while ensuring relevant market dynamics are considered when assessing market outages.

Regulation ASIC

ASX CHESS Replacement Tranche 3 Rules

AFMA made a submission to the ASX seeking clarity and confirmation around several technical matters such as notification processes for when batch settlement are cancelled on a business day and CCP Market Trade Batch Instructions are rescheduled on a net basis. AFMA also sought clarity on terminology changes noting significant impact on client collateral and digital materials for member firms. 

Regulation ASX

WGEA Review of the Workplace Gender Equality Act 2012

AFMA made a submission to the Workplace Gender Equality Agency's Review of the Workplace Gender Equality Act 2012, noting support for the removal of barriers to the participation of women in the workplace and the elimination of discrimination based on gender where it exists around employment matters. AFMA's submission highlighted the need for refined categorisation to enable like-for-like comparison for better data accuracy, consideration of increased worplace flexibility in recent times and need for more administrative efficiencies. 

Regulation Workplace Gender Equality Agency

ASIC Product Design and Distribution Obligations

AFMA lodged a submission to ASIC regarding equity research in terms of the ASIC Product Design. AFMA noted that there is a risk that the research product may be captured when the sell-side analyst changes their recommendation from "sell" or "hold" to "buy" and increases their price target as a result, AFMA believes this is not an intended regime outcome. AFMA also suggested a safe harbour be introduced.

Regulation ASIC

ASIC Consultation Paper 347 Proposed amendments to the prohibition on order incentives in the ASIC market integrity rules

AFMA reviewed ASIC Consultation Paper 347 and has provided support for ASIC's aims in seeking to support good investor outcomes and avoid negative impacts on market quality related to 'payment for order flow'. AFMA also supported the simplification of the concept of 'negative commissions.' 

Regulation ASIC

Exposure draft of the Trusted Digital Identity Bill and related legislative instruments

AFMA responded to the Exposure Draft with support on the expansion of the digital identity system to the private sector that encourages standardised approaches to identity verification. AFMA also reiterated previous commments made from previous submission to the Positions Paper.

Regulation Government

Second Round of Miscellaneous Amendments to Treasury Portfolio Laws 2021

AFMA made a broad submission regarding the proposed amendments to the LIBOR cap and dictated their disagreement with the proposed amendments dictating how AFMA have steadfastly supported the abolition of the cap. AFMA believe the cap has adversely impacted banking competition and that the LIBOR cap should not be replaced with any other capping mechanism based on benchmark rates.

Taxation Treasury

2006 ISDA Definitions and 2021 ISDA Interest Rate Definitions – BBSY Fallback

AFMA made a submission to ISDA in regards to the BBSY fallback to simple AONIA which the AFMA IBOR Market Responses Group agreed on in early 2021. Additionally, information regarding the Credit spread adjustment for transition from BBSY to AONIA was also part of AFMA's submission.

Other ISDA

2021 Unfair Contract Terms Reforms - Treasury Consultation

AFMA reviewed the Treasury Laws Amendment Bill 2021: Unfair Contract Terms Reforms (UCT Bill) and raised concerns in how it may be applied. AFMA believed that the UCT Bill created an area of legal uncertainty  requested a dialogue with the Treasury to discuss potential of prescribing a class of financial markets contracts to address these uncertainties. 

Regulation Treasury

Tax Implications of IBOR Reform

AFMA made a joint submission with the Australian Banking Association and Financial Services Council in response to the ATO discussion paper on tax implications of IBOR reform. A particular focus was on seeking a practical solution for affected entities. 

Taxation ATO

Your Future Your Super - Portfolio Holdings Disclosure

AFMA made a submission to the Treasury consultation on a revised disclosure regime for super funds, that removes the publication of counterparty names and maturity dates. AFMA made a submission supporting the revisions but cautioned that ongoing monitoring to ensure super investors were not disadvantaged was appropriate. We highlighted issues around the potential for options positions in particular to be disadvantaged and proposed removing the requirement for exercise price disclosure.   

Regulation Treasury

AEMC Consultation on Contingency Arrangements for 5MS Implementation

AFMA made a submission to the AEMC consultation on AEMO’s proposed contingency options for a potential delay to the implementation of 5-minute settlement (which as of 1 September 2021 is no longer required following the Market Start Notice indicating readiness for 1 October). AFMA’s submission noted that should a delay be required, an intra-quarter commencement date should be avoided to ensure minimal impact on contracting arrangements. 

Regulation AEMC

Home Affairs - Strengthening Australia’s cyber security regulations and incentives

AFMA made a submission to the Home Affairs consultation considering whether governance arrangements around IT for large firms should be voluntary or mandatory. Our submission proposed that these should be voluntary, noting that ADIs already face extensive regulation of IT Governance through the CPS 234 prudential standard.    

Regulation Home Affairs

The adequacy and efficacy of Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime

AFMA lodged a submission to the Senate legal and Constitutional Affairs Committee Inquiry into the Adequacy and Efficacy of Australia’s AML/CTF Regime, encouraging regulation of Tranche 2 entities and improvements to the AUSTRAC Industry Contribution arrangements. 

Regulation Senate Legal and Constitutional Affairs Committee

ASX consultation on amendments to incorporate 2021 ISDA Definitions

AFMA made a brief submission to the ASX consultation on amendments to the ASX Clear (Futures) Operating Rules and Procedures to incorporate the 2021 ISDA Interest Rate Derivatives Definitions and clarify the ownership of cash and securities deposited as margin or commitment.     

Regulation ASX

Single Disciplinary Body for Financial Advisers

AFMA made a submission to the Treasury’s consultation on a Single Disciplinary Body for Financial Advisers: Policy Paper, acknowledging the Government's consideration of initial stakeholder feedback which highlighted concerns around an FSCP convening for large volumes of minor, immaterial and administrative matters, and recommendations for efficient disciplinary processes. We further supported a meaningful scoping of sanctions that should be included on the Financial Advisers Register (FAR) to limit negative effects on financial advisers relative to the gravity of misconduct. 

Regulation Treasury

APRA - ADIs preparedness for zero and negative interest rates

Guidance provided by APRA outlines its expectation that impacted ADIs develop tactical solutions by 30 April 2022, including those which generate an economic outcome that is the same as a negative interest rate. Following consultation with members, AFMA made a submission to APRA seeking guidance on whether it would consider the management of the interest accrual outside of the ADI’s primary loan or deposit modules to be an acceptable short-term tactical solution. 

Regulation Treasury

Treasury Consultation on Compensation Scheme of Last Resort

AFMA responded to the Treasury consultation on the Exposure Draft legislation for the Compensation Scheme of Last Resort. AFMA’s primary concerns are around ensuring that the governance arrangements and incentives are appropriately calibrated to ensure balanced and sustainable outcomes for the scheme, and that to the greatest extent possible firms in sectors with little to no connection to a failed firm are not required to contribute to funding matters connected to the failed firm.  

Regulation Treasury

Financial Accountability Regime – Exposure Draft Legislation

AFMA made a submission  to the Treasury consultation on Exposure Draft legislation to implement the Financial Accountability Regime (FAR), seeking closer alignment with the APRA Remuneration Standard, removal of ancillary liability provisions, and other elements that create unreasonable demands on accountable persons, and a separation of the FAR breach reporting and investigation requirements from the broader breach reporting regime. . 

Regulation Treasury

ASIC Cost Recovery Implementation Statement 2020-21

AFMA made a submission to the latest ASIC Cost Recovery Impact Statement (CRIS) 2020-21. The submission highlighted the underlying issues with ASIC’s industry funding model with insufficient accountability for large variances and overshoots which create a major impediment to doing business in Australian financial markets. 

Regulation ASIC

Treasury consultation on the regulation of foreign financial service providers (FFSPs)

AFMA proposed measures to rationalise the regulation of wholesale financial services involving FFSPs, in order to support efficient access by Australian businesses to the global securities markets.  A key reform is removal of financial services provided by FFSPs to ‘professional investors’ from the scope of the Australian financial services licensing regime.

Regulation Treasury

ASIC CP 342 MIR Amendments

AFMA made a broadly supportive submission to the ASIC consultation on various MIR Tidy ups - CP 342. AFMA’s representations will extend through a side-process ASIC commenced in response to AFMA’s input that is considering client money related streamlining of the requirements.

Regulation ASIC

APRA CPG 229 Climate Change Financial Risks

AFMA made a joint submission with ASIFMA to APRA on Draft Prudential Practice Guide CPG 229 Climate Change Financial Risks, noting that the financial services industry is constantly evolving business structures to achieve various sustainability goals while maintaining commercial viability. We voiced support for rational development of regulatory expectations that are well-attuned to industry capability, outcomes-focused and consistent with emerging global best practices.

Regulation APRA

Treasury Consultation on Relief to Foreign Financial Service Providers

AFMA made a submission to the Treasury consultation on options to replace the Foreign Financial Service Provider (FFSP) licensing regime, highlighting the importance of building on existing arrangements for professional investors to freely access from Australia the services they need from foreign providers in other jurisdictions, to address the problem of extra-territorial overreach by establishing a proper boundary for licensing requirements. 

Regulation Treasury

ASIC CP 343 Crypto-assets as Underlying Assets for ETPs and Other Investment Products

AFMA welcomed ASIC’s principles-based and technology neutral approach to crypto-assets that aims to achieve a sensible balance in an emerging and in some cases, high-risk, area.  We emphasised the importance that the framework for responding to crypto assets is developed in a way that allows for ready adoption of government-backed fiat currencies in CBDC form. 

Regulation ASIC

ASIC CP 344 Remaking class order on when debentures can be called secured notes [CO 12/1482]

AFMA made a brief submission to ASIC to support the remake of the Class Order instrument on when debentures can be called secured notes (CO 12/1482), set to expire in April 2022. We noted that the class order is operating effectively and efficiently, as a valued part of the regulatory framework.

Regulation ASIC

APRA Draft CPG 511 Remuneration

Prior to the release of the finalised Remuneration Standard CPS 511 in August 2021, AFMA responded to APRA's consultation on a draft Prudential Practice Guide (CPG 511 Remuneration).  AFMA commented that Prudential Practice Guide CPG 511 was generally sensible and provided helpful insights into APRA’s expectations around complying with the CPS 511 Remuneration Standard.

Regulation APRA

Digital Identity Legislation Position Paper

AFMA made a submission to the Government's public consultation on Australia’s Digital Identity legislation, voicing support of the development of a whole-of-economy digital identity system that supports innovation, interoperability, consumer choice and is markets-based. 

Regulation Digital Identity Australia

Third Issues Paper - Senate Committee on Australia as a Technology and Financial Centre

AFMA lodged a submission with the Senate Committee into Australia as a Financial and Technology Centre on replacements to the OBU regime, which followed the Government announcement in March that it would repeal the regime based on concerns expressed by the OECD regarding the regime’s 10% concessional tax rate.  130 OECD nations have since agreed to implement a global minimum tax rate of 15%.  Accordingly, AFMA’s proposed “Global Markets Incentive” (GMI) regime recommends a 15% rate to apply to largely institutional transactions not denominated in AUD.

Taxation Senate Committee on Australia as a Technology and Financial Centre

ARS 220.0 Credit Exposures and Provisions: Supplemental feedback

While APRA is proceeding with a phased implementation of the reporting standard ARS 220 as recommended by AFMA in February, the current lack of a firm timeline for the release of the taxonomy is of concern, given APRA expects ADIs to meet a Q2 2023 commencement. AFMA reiterated the importance of the release of this taxonomy and drew attention to potential overlaps and inconsistencies of the reporting standard with respect to accounting standards and Pillar 3 reporting.

Regulation APRA

APS 111 Capital Adequacy: Measurement of Capital

The draft revision of APS111 provided for the standard to apply to foreign ADIs in circumstances where APRA is not satisfied an entity is subject to capital adequacy standards in its home country that are comparable to those that apply in Australia to a domestic ADI. AFMA's submission sought clarity on whether foreign ADIs would need to demonstrate equivalent capital adequacy standards for the purposes of substituted compliance.

Regulation APRA

Energy Security Board Post-2025 Market Design Options Paper

AFMA made a submission to the ESB Options Paper consulting on market design options prior to final recommendations being made to Ministers in mid-2021. AFMA’s submission centred on contract market implications of the proposed changes to transmission access and advocated for further analysis and industry consultation to be undertaken prior to any options being developed further.

Regulation Energy Security Board

CP340 Guidance on Breach Reporting and Related Obligations

AFMA made a submission to ASIC’s consultation CP340 on breach reporting guidance that seeks to implement the related regulations, focusing comments on the carve out for ASIC Market Integrity Rules and Derivatives Trading Rules from ‘deemed significance’ provisions related to the reporting of core obligations breaches.

Regulation ASIC

Greater Transparency of Proxy Advisers Consultation

AFMA made a submission to Treasury to seek clarity and confirmation that any proposed proxy adviser regulation does not extend to independent sell-side research published by investment banks, given that sell-side research is sufficiently regulated through ASIC RG 264 and 79.

Regulation Treasury

Phase 1.5 Rules

AFMA made a submission to AUSTRAC regarding proposed Rules to support the Phase 1.5 reforms of the AML/CTF regime, which tightened up correspondent banking due diligence requirements and enhanced the reliance provisions and the ability to share information. Our submission sought to ensure the Rules reflect both regulatory expectations and reporting entities’ understanding of the new requirements.

Regulation AUSTRAC

Draft Critical Infrastructure Asset Definition Rules

AFMA made a submission to draft rules under the enhanced regulatory framework for critical infrastructure, supporting further engagement with industry to refine the definition of critical assets, particularly banking and financial markets infrastructure assets. Our submission also highlighted the complex interaction between the critical infrastructure regime and the FIRB framework.

Regulation Home Affairs

VEU Program Stakeholder Engagement

AFMA sent a letter to the Victorian Department of Environment, Land, Water & Planning to outline concerns around fragmentation of market communications for the Victorian Energy Upgrades Program and suggest improvements to stakeholder engagement.

Regulation Department of Environment, Land Water & Planning & Essential Services Commission

Consultations on Modernising Business Registers (Director Identification Number Regime)

AFMA made a submission to a Treasury consultation on legislative instruments related to the introduction of the Director Identification Number regime, outlining issues for directors of registered foreign companies that were not considered in the design of the regime that require clarification or modification.

Regulation Treasury

Draft Amendments to Breach Reporting Regulations

AFMA made a submission in regard to draft breach reporting regulations that implement the new breach reporting rules in Schedule 11 of the Financial Sector Reform Act 2020. The submission focussed on proposed changes that would result in market integrity rules being incorporated as ‘core obligations’.

Regulation Treasury

Revisions to the capital framework for Authorised Deposit-taking Institutions

AFMA made a submission in relation to APRA’s proposed revisions to the ADI Capital Framework, seeking concessions on the credit conversion factor (CCF) applicable to retail margin lending activities.

Regulation APRA

CHESS Replacement: Proposed changes to netting and settlement workflow

AFMA responded to the ASX consultation paper on proposed changes to the CHESS replacement project functionality. AFMA raised concerns that the reduced functionality increased risks and costs for clearing brokers. Our submission noted that the industry was interested to understand alternatives to the proposed approach and suggested that an external risk analysis of the impact of the proposed changes on both the exchange and broker systems should be undertaken before consideration could be given to proceeding with the proposed changes.

Regulation ASX

ASIC Report 668 Allocations in debt capital market transactions

AFMA sent a letter to ASIC on March 17 outlining member observations on particular aspects of Report 668 which outlines ASIC expectations around best practices for allocations in debt capital markets. Main observations related to matters concerning the role of compliance, joint lead manager (JLM) orders and inflated bids.

Regulation ASIC

CP334 Joint AFMA-ISDA-GFMA submission to ASIC Review of Derivative Transaction Rules (Reporting) 2013

ASIC is conducting a review of the ASIC Derivative Transaction Rules (Reporting) 2013 through a two-stage consultation in 2021. The first round of consultation through CP 334 set out initial proposals to harmonise the rules to international standards and remove outdated provisions to ensure the rules are fit for purpose. AFMA joined a submission with ISDA and GFMA, outlining areas where further clarity is required on the proposals and specifying where additional guidance should be incorporated.

Regulation ASIC

BBSW Fallbacks in RBA-Eligible Securities

AFMA sent a submission to the RBA in response to a consultation on the plan to publish new eligibility criteria in the first half of 2021, which will require fallbacks for new BBSW-linked securities issued on or after 1 July 2022. AFMA made a submission after reviewing the draft criteria proposed for fallback provisions, noting that member feedback indicated general support for the Bank’s planned course.

Regulation RBA

Proposed amendments to Chapters 3, 6, 7 and 10 of the AML/CTF Rules (the Phase 1.5 Reforms)

AFMA made a detailed submission on the proposed Rules to support the “Phase 1.5” amendments to the AML/CTF Act.  Our submission focussed on areas to align the proposed Australian requirements with other jurisdictions to mitigate regulatory fragmentation, ensuring sufficient lead times to allow for members to update systems and processes and reducing proscription around certain matters, instead allowing reporting entities to adopt a risk-based approach. 

Regulation AUSTRAC

CPS 226 Joint AFMA-ISDA submission on LIBOR transition discrepancies in timeliness of reconciliations

On behalf of the IBOR Transformation Australian Working Group, AFMA joined with ISDA in sending a submission to APRA regarding the issue of timeliness in resolving portfolio reconciliation discrepancies under CPS 226 when dealing with legacy swaps for the purposes of transitioning from LIBOR, subsequent the CFTC granting a no-action relief from this requirement for amendments to legacy swaps to accommodate fallbacks to alternative benchmarks.

Regulation APRA

CP 338 Remaking ASIC Class Order on Parent Entity Financial Statements

AFMA made a brief submission to ASIC welcoming the remake of Class Order [CO 10/654] Inclusion of parent entity financial statements in financial reports, which was due to expire on 1 April 2021.

Regulation ASIC

Extension of Margin Lending Instalment Warrants Relief

AFMA sent a submission to ASIC on 5 March to seek an extension to the relief provided in the ASIC Class Order Margin lending relief for ASX-traded instalment warrants (CO 10/1034) due to sunset on 1 April. The relief was extended by the release of ASIC Corporations (Margin Lending Relief for Exchange-Traded Instalment Warrants) Instrument 2021/194 on 24 March.

Regulation ASIC

Market Data in The Secondary Equity Markets

AFMA sent a submission to IOSCO in response to its Market Data in the Secondary Equity Markets Consultation Report, endorsing the principles set out in the joint response to the consultation by ICSA and GFMA. The ICSA/GFMA submission provides analysis that illustrates both the causes of high market data costs and the consequences for market efficiency.

Regulation IOSCO

APRA Remuneration Standard 511

AFMA made a submission to the APRA consultation on a revised draft of a remuneration standard, which significantly improved on the previous draft released. Members had flagged concerns around the threshold for inclusion and the burden for smaller foreign ADIs.

Regulation APRA

ASX Clear Consultation Trust Segregated Accounts

AFMA responded to an ASX consultation paper on proposed amendments to the ASX Clear Operating Rules and Guidance Note 12 to provide an improved framework and guidance to assist participants to comply with client money obligations.

Regulation ASX

ASIC CP 333 Reference Checking and Information Sharing Protocol

AFMA provided a submission to the ASIC consultation on implementing the Hayne Royal Commission’s recommendations that firms expand the existing industry standard approach to reference checking for financial advisors.

Regulation ASIC

Treasury Payments System Review

AFMA responded to the Treasury consultation reviewing the regulatory architecture of the Australian payments system to ensure it remains fit-for-purpose and is capable of supporting continued innovation for the benefit of consumers, businesses and the broader economy.

Regulation Treasury

ASIC CP322 Affordable Advice

AFMA provided a submission to an ASIC consultation CP 332 which seeks input from industry participants and relevant stakeholders to help ASIC understand the issues and impediments relating to the supply of good quality affordable personal advice; and the practical steps that can be taken by ASIC and industry to improve consumer access to good quality affordable advice.

Regulation ASIC