The Australian Securities and Investment Commission (ASIC) has released new financial requirements for Australian financial services licensees who issue over-the-counter (OTC) derivatives to retail clients, including contracts for difference and margin foreign exchange.

The changes aim to ensure these AFS licensees have adequate financial resources to operate their business in compliance with the Corporations Act and to carry out supervisory arrangements.

ASIC Commissioner, Greg Tanzer said the new requirements had been developed to help ensure licensees have the financial resources to more adequately manage their operational risks in this growing area and followed a lengthy consultation process with industry.

‘Considering the complex and risky nature of retail OTC derivative businesses, issuers should be subject to enhanced financial requirements’, Mr Tanzer said.

‘In our review of this sector, we have found that poorly resourced issuers of retail OTC derivatives are less likely to carry out adequate supervisory arrangements and are more likely to encounter compliance breaches.

‘We need to raise the bar higher to ensure licensees have adequate financial resources to properly oversee and manage the operational risks inherent in the OTC derivatives market. Ultimately, this goes to our strategic priority of promoting the confident participation of retail investors in financial markets.

‘The increase to the minimum financial requirements for retail OTC derivative issuers also brings Australia in line with comparable jurisdictions, such as the United Kingdom and Singapore’, Mr Tanzer added.

The requirements, implemented through Class Order [CO 12/752] Adequate financial resources for financial services licensees that issue OTC derivatives to retail clients and outlined in Regulatory Guide 239 Retail OTC derivative issuers: Financial requirements (RG 239) build on the general guidance in Regulatory Guide 166 Licensing: Financial requirements (RG 166), by addressing the particular operational risks and characteristics of the retail OTC derivatives sector.

Under the changes, retail OTC derivatives issuers must meet a net tangible asset (NTA) requirement, which will require them to hold NTA the greater of:

From 31 January 2013:

  • $500,000, or
  • 5% of average revenue

From 31 January 2014:

  • $1,000,000, or
  • 10% of average revenue.

The Federal Government has released a discussion paper inviting views on options for a more workable approach for fixed trusts.

Superannuation fees have continued to fall according to the latest Financial Services - Rice Warner Actuaries Superannuation Fees report which shows a clear downward trend since the study commenced in 2002.

A new study at the University of South Australia will investigate flexible working options to assist workers who are reaching retirement age with depleted superannuation funds. 

The Australian Bankers’ Association (ABA) has warned the Australian Government against adopting American ideas which resulted in poor lending decisions which triggered the global financial crisis (GFC).

Financial Services Council (FSC) CEO, John Brogden, has recently visited Washington DC to continue discussions with senior US Treasury and IRS officials, relevant members of Congress and congressional representatives on the Foreign Account Tax Compliance Act (FATCA) regime.

The Finance Sector Union will hold meetings around Australia next Monday to discuss the proposed new AustralianSuper enterprise agreement.

Macquarie Group has announced a slight lift in performance for the first quarter of the 2013 financial year compared with the same period last year due to a stronger performance by Fixed Income, Currencies and Commodities (FICC).

ASIC has released Consultation Paper 181 Retail trading in Commonwealth Government Securities (CP 181)  focused on the Australian Government’s decision to facilitate retail trading of Commonwealth Government Securities (CGS) as part of fostering a deep and liquid corporate bond market.

ASIC has released the findings of a review of responsible entities (REs) operating managed investment schemes in the unlisted property sector.

As part of this review, ASIC is highlighting some areas where compliance behaviours could be improved to meet both the legal obligations of the REs and good practice within the industry.

ASIC Commissioner, Greg Tanzer, said ASIC chose REs operating unlisted property schemes because they are a popular investment vehicle for retail investors and they pose some risks, particularly because of their illiquidity. Current economic conditions meant this sector had been experiencing some stress.

‘We found that the majority of the REs reviewed are complying with their obligations and adhering to good industry practice. We are pleased with the level of cooperation we received and the willingness of REs to commit resources to address issues raised by ASIC.

‘However, there were some areas of non-compliance with key obligations which we have highlighted to ensure RE’s take immediate steps to rectify’, Mr Tanzer said.

These areas include:

The Minister for Financial Services, Bill Shorten, has announced an exemption for employees of the timeshare industry from the ban on conflicted remuneration under the Future of Financial Advice (FOFA) reforms that will allow the industry to continue to remunerate its employees through sales-based commissions.

Females and those aged 35-60 are at risk of not meeting their retirement objectives while weak investor sentiment continues, according to The University of Western Australia and Colonial First State Global Asset Management (CFSGAM) research.


The findings are based on the CFS-UWA Business School Equity Preference Index (EPI) which measures a sizeable database of managed fund data to gauge investor sentiment in Australia.


The overall results show a decline in concern over the vulnerability of equities has developed since September 2011. However when those figures are broken down, women continue to appear more sensitive to current changes in market performance than males.


Females were more likely to move out of equities than males after the Global Financial Crisis, which began in 2007. While this trend follows a historical pattern the researchers consider it could also follow that since the GFC, female employment has been slower to return than male employment.


The research cites that since a labour market trough in June 2009, unemployment among men has fallen 17 per cent compared with unemployment among females which has risen three per cent.


"The cautious investment behaviour of women raises concerns about lower female superannuation balances, with growing risk of not meeting their retirement objectives unless savings level increased," report author Winthrop Professor Ray da Silva Rosa said.


More generally, traditional investor groups aged over 35 have also shown a tendency to move out of equities and into capital preservation compared with younger investors.


"It's unclear if this lower preference for equities will continue but in Australia the relatively attractive deposit rates are creating little incentive to return. If confidence in equity markets fails to return, it's likely to have a severe impact on superannuation benefits, particularly for those most risk averse groups, which include females and middle age groups (35-49 and 50-59)," Professor da Silva Rosa said.


The report concludes that if investor confidence in equities does not return, there will be a need for an increase in savings levels to compensate for lower expected returns to meet the retirement needs of Australia's ageing population.

Westpac has announced the appointment of John Harries as the company's new General Manager, Strategic Marketing in its Australian Financial Services (AFS) division.

The Australian Payments Clearing Association (APCA) has released payments fraud statistics across all financial institutions, finding that the total value of check and payment card fraud in Australia for 2011 year had increased 11.4 cents to 16.2 cents in every $1,0000 transacted.

The number of Australian companies paying their bills on time has fallen markedly during the June quarter as they struggle to deal with reduced cash flow, according to the latest Dun & Bradstreet Trade Payments Analysis.

The Commonwealth Bank has unveiled its new point-of-sale (POS) system, including the release of its new Albert touch screen omni-commerce device which will run the bank’s new CommBank Pi software platform system.

The Commonwealth Bank is set to follow in the footsteps of its competition after it announced it will freeze the pay of around 400 senior staff, including CEO Ian Narev, in a bid to ward off potential job cuts.

The International Monetary Fund (IMF) has downgraded its global economy growth forecasts by .1 per cent, citing ongoing economic turmoil in Europe and the uncertainty in global financial markets. The revised growth figures see the IMF’s forecasts down to 3.5 per cent for the year, the lowest rate since the depths of the global financeal crisis in 2009.

Results published by the Australian Bureau of Statistics (ABS) show that new home lending has slipped back in May. The ABS tracked a 1.4 per cent contraction in the value of total dwelling commencements over the April to May period, while fixed loans entered freefall, recording a 4.6 per cent fall.

Australia’s largest businesses are increasingly less inclined to move their primary transaction banking relationship to a non-big four bank, according to recent research conducted by banking industry consultants East & Partners.

Retail mortgage specialist Loan Market has found that inquiries for fixed interest rate mortgages have flat-lined since the Reserve Bank of Australia (RBA) lowered the official cash rate to 3.5 per cent.

Archived News

RSS More »