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The Stockbrokers Association iLearning is a new online education system that will allow industry professionals to complete their CPD requirements not only at the comfort of their desk but also at a time convenient to their busy schedules. We believe this new initiative is very exciting and allows us to offer CPD with an industry focus, where other CPD providers don’t. The NEW Stockbrokers Association iLearning – an online education system is scheduled to launch in Q4 2010. Demonstrations of the Stockbrokers Association iLearning system will be available shortly, if you would like to a demonstration please contact Gauri ‘G’ Wallia on (02) 8080 3201 or via email at gwallia@stockbrokers.org.au.
The Stockbrokers Association Delegation to China is scheduled to depart Sydney on Sunday 24 October through to Monday 1 November and place are limited. The delegation will visit Shanghai, Beijing and Hong Kong over the 7-day period. The purpose of the trip is to develop better knowledge of how business is transacted in China and obtain a better understanding of the regulatory environment and capital markets – both of which are integral to Australia. For further information about this trip or to express your interest, please contact Lillian Khoury on (02) 8080 3203 or via email at lkhoury@stockbrokers.org.au.
The new margin lending legislation commenced on 1 January 2010, with a 12-month transition to its effective date of 1 January 2011. In relation to training, ASIC has announced an 18-month transition period to update training for margin lending, meaning retail advisers will need to be RG146 compliant by 1 July 2011. To meet this demand, we have developed a NEW Margin Lending Accreditation which meets all these requirements. Candidates will receive 10 CPD hours (of which 6 are Compliance) for undertaking this accreditation.
The Professional Stockbrokers Program is Australia’s only professional qualification in stockbroking. Candidates who successfully complete the Professional Stockbrokers Program will be awarded a Professional Diploma in Stockbroking. For further information on the Professional Stockbrokers Program or any of the events and education courses detailed, please visit www.stockbrokers.org.au or call the Stockbrokers Association of Australia on (02) 8080 3200.
In July we hosted the first Young Member Networking Lunch in Sydney and are pleased to announce a second event due to popular demand. The next Young Member Networking Lunch will be held in Sydney on Monday 23 August. The aim of the lunch is to provide young members the opportunity to meet other young people working in the broking industry. The lunch is strictly limited to 20 people and registration is essential so please visit www.stockbrokers.org.au to RSVP today. More Young Member functions have been scheduled in the latter part of 2010, so please visit the website regularly for further details.
- Young Member Networking Lunch: Mon 23 August, Sydney NSW
- Young Member Lawn Bowls: Thurs 21 October, Sydney NSW
- 2010 Delegation to China: Sun 24 October to Mon 1 November, Shanghai, Beijing & Hong Kong
- Young Members Drinks: Thurs 4 November, Brisbane QLD; Thurs 25 November, Sydney NSW; Thurs 2 December, Melbourne VIC
- 8th Annual Stockbrokers Charity Golf Day: Wed 25 May 2011, Sydney NSW
- 2011 Annual Stockbrokers Conference: Thurs 26 & Fri 27 May 2011, Sydney NSW
David W Horsfield MSAA
Managing Director & CEO
Recent meetings of Stockbrokers Association Committees, Working Groups and Advisory Panels, and major issues discussed:
– Wednesday 7 July
Chair: Brad Usasz MSAA, Wilson HTM Ltd
– Thursday 8 July
Chair: David Horsfield MSAA, Stockbrokers Association
– Thursday 15 July
Chair: Grahame Pratt MSAA, RBS Equities
- Multi Market Issues
- Market Supervision Changes
- Margining for Cash Equities- ASX Paper
- ASIC - Substantial shareholding relief proposals for stock borrowing and Prime Broking
- ASIC CFD Report
– Wednesday 28th July
August 1 heralded a new era in market supervision in Australia, with ASIC taking over market and participant supervision from ASX. ASIC has worked very hard since the Government announced the
changes in August last year to manage the transition of market supervision and we trust that as far as possible Members are experiencing a seamless transition from ASX to ASIC regulation. The Stockbrokers Association is looking forward to working further with ASIC to address the many issues that will inevitably arise as the transition is bedded-down over the next year or two, including duplication of rules, funding market supervision and multi-market issues. (See ASIC Now Supervises Australian Financial Markets article on Page 6 of this edition of Stockbrokers Monthly). Some particular aspects of the changes are noted below.
- Disciplinary Panel Appointed: ASIC has announced the inaugural members of the ASIC Markets Disciplinary Panel. We would like to congratulate Lisa Gay, Chair and her Panel including Michael Manford and Russell McKimm of Patersons, Leigh Conder of CBA, Geoffrey Louw of Bell Potter and Simon Gray of Shaw on their appointments.
- Individual Liability Clarified...for Now: As Members may have seen in recent press commentary, we have sought and obtained clarification as to whether ASIC can issue infringement notices to individuals working in brokers’ offices under the new ASIC Market Integrity Rules. The maximum penalty for breaches of the Rules is $1 million. ASIC has confirmed that it can only enforce the rules against the participant firm, not the individuals within it. However, such individual liability may be proposed in the future. Fortunately the same can be said for ‘non-broker brokers’ - i.e. they are not caught by the Market Integrity Rules now, but there could be moves to include them in the future.
- Responsible Executive Exams Split: Post-1 August, the RE regime is now split between ASIC and ASX. Trading Participants are required to have RE’s under the ASIC Market Integrity Rules. Clearing Participants are required to have RE’s under the ASX Clear (formerly ACH Clearing) Rules. Accordingly, RE’s wishing to have front and back office coverage will need to pass two exams, one for ASIC/ASX Market Integrity Rules and one for the ASX Clear Rules. The Association is preparing to offer its version of the ASIC/ASX Market Integrity Rules Exam. Currently, the ASX Clear Exam is only available through Kaplan under its exclusive arrangement. The combined ASX/ACH Rule Exam which used to be offered is no longer available. However, the Association is exploring a solution in this regard.
- Supervision Funding: ASIC now has the power to levy fees on market operators (like ASX) for the cost of providing market supervision services. Funding of some $4 million from the National Guarantee Fund has been approved to pay ASX’s expenses for the 2011 financial year. We are exploring issues that are raised by these arrangements.
- DTR’s: DTR’s play an important role in protecting the integrity of the markets. While ASX has removed its requirements, after submissions by the Association, ASIC has restored the requirement that trading messages only be placed by DTR’s (or via Automated Order Processing systems which meet the operating requirements).
- ASX Fines Reduced: Consistent with our earlier submissions, ASX is to be commended for reducing the maximum fine under its remaining Operating Rules from $1 million to $250,000.
- Capital Requirements: For all Participants, existing ASX capital requirements continue to apply until 30 June 2011.
In June and August we met ASIC with a small group of Members to discuss the ‘May 6’ market disruptions that occurred in the US and the issues for Australia once multiple markets are operating in this country.
Particular matters discussed included:
- Circuit Breakers: Whether having set parameters can themselves form the basis of trading strategies.
- Trade Cancellation Policies: Two main approaches - discretion (e.g. ASX Governors) v. Circuit breakers (e.g. SFE auto cancellation). NYSE uses a market pause approach once a ‘disorderly market’ has been identified.
- Client ID’s (i.e. providing them on input of orders): This is being considered in US and Europe now to assist regulators, and there may be pressure to introduce it here.
- Algorithmic Trading in Small Caps: Should it be restricted?
- Best Execution: While the detail of the best execution rule is not known, clearly the Canadian model is being considered. Should there be a different rule for retail and wholesale clients?
- Market Orders: The impact of market orders on May 6 in the US was noted. A prohibition on market orders would lead to a lot more work for operators and systems in working orders. Likely to be a matter for consultation.
- IOSCO Moves: ASIC noted an IOSCO paper is about to be published on DMA trading, which will no doubt be influential on Australian regulators.
Members noted that there could be possible competitive disadvantage for Australia if rules are made tougher than those in the region. Whatever controls ASIC is considering, the key is to ensure consistency across all the Australian markets that ASIC supervises, otherwise ‘regulatory arbitrage’ opportunities may arise. ASIC will be formally consulting on these and other issues in September.
The Federal Government’s response to the Storm Inquiry, ‘The Future of Financial Advice’ is proceeding to targeted consultation in the second half of 2010, ahead of full implementation in 2012.
The package includes the following:
- A prospective ban on conflicted remuneration structures including commissions and volume based payments, in relation to the distribution and advice of retail investment products including managed investments, superannuation and margin loans.
- The introduction of a statutory fiduciary duty so that financial advisers must act in the best interests of their clients, subject to a ‘reasonable steps’ qualification, and to place the best interests of their clients ahead of their own when providing personal advice to retail clients.
- Increasing transparency and flexibility of payments for financial advice by introducing ‘adviser charging’ that will help align the interests of the financial adviser and the client; is clear and product neutral; and where the investor will be able to opt in to the advice in response to a compulsory, annual renewal notice.
- Percentage-based fees (known as assets under management fees) will only be charged on ungeared products or investment amounts and only if this is agreed to with the retail investor.
- Expanding the availability of low-cost ‘simple advice’ to provide access to and affordability of financial advice.
Strengthening the powers of the Australian Securities and Investments Commission to act against unscrupulous operators.
- The examination of a statutory compensation scheme.
The Association will be further consulting with Members as more detailed proposals become known. (http://futureofadvice.treasury.gov.au)
Members will recall that in 2009 ASX published a proposal to demand margins to be lodged by clearers for unsettled cash equities transactions. In June, ASX announced that despite possible liquidity and cost impact, it was proceeding with the proposal, subject to a brief period of limited consultation. Since the initial consultation, ASX has made the following modifications:
- The ‘look back’ approach to assessing margins has been rejected.
- No routine contributions to a default fund will be required.
- No splitting of clearing accounts into house and aggregated client accounts.
- No mandatory passing of margins to clients.
- No margin offsets between cash equities and derivatives.
Our proposal to have the facility to ‘lock’ CHESS stocks and monies prior to settlement has been rejected on operational and legal grounds. ASX says it has addressed cost concerns by using the ‘Value at Risk’ model thought to reduce margins, and allowing a wide range of acceptable collateral (which will not be Excluded Assets). ASX has raised a limited number of matters for final consultation. A meeting of members was held and a submission was made in August, ahead of the planned implementation by ASX in Q4 2011.
ASIC regularly contacts the Association for referrals to brokers who may be able to assist in ASIC’s regulatory activities. If you may be willing to assist in this regard, please contact us.
ASIC has recently conducted further consultation with the Stockbrokers Association regarding the application of the substantial shareholding reporting provisions in the Corporations Act to the areas of Prime Broking and Stock Lending. This flows out of the ASIC Consultation Paper CP 107 issued for comment in July 2009 on this subject.
It may be recalled that ASIC canvassed issues in CP 107 relating to the appropriateness of the substantial shareholding reporting obligations to some aspects of prime broking and stock lending, and raised questions as to whether any relief should be granted and on what terms.
In the further consultation, ASIC has asked for additional submissions relating to proposals to;
- grant relief to allow a prime broker to exclude the right to re-hypothecate securities of a prime broking client from having to be included in its substantial shareholder notices, until such time as the stock is actually borrowed by the prime broker
- grant class order relief to allow securities lenders who are intermediaries to disregard relevant interests arising from a matched securities lending transaction which is carried out on the same trading day from having to be included in the lender’s substantial shareholding notices.
The Association has consulted with members and lodged a further submission supporting the proposals to grant the relief indicated, however arguing that the proposals do not go far enough. In the Association’s 2009 Submission in response to CP107, there was a detailed analysis of the various practical difficulties which arise in complying with the substantial shareholding provisions in these areas, and the Association has reiterated the need for all of these difficulties to be addressed in any relief that is granted by ASIC. The need for there to be similar relief for FIRB, Takeovers and individual ownership limits arising from specific legislation, all of which can flow from these relevant interests, was also highlighted.
ASIC has recently conducted preliminary consultation with the Stockbrokers Association in relation to a Consultation project which it is proposed will result in the issue of a new Regulatory Guide on the subject of Better Prospectus Disclosure. The aim of the project is to provide further and clearer guidance on the standard of disclosure in prospectuses, having regard to the obligation on issuers for prospectuses to be “clear, concise and effective”.
ASIC has foreshadowed that there will be a public consultation round later this year, and the views of all sectors of the market will be sought. This will be an excellent opportunity for members to contribute towards the discussion of issues regarding the drafting and marketing of prospectuses and the formulating of new rules and guidance on the subject.
On 12 July 2010, ASIC released its Report 205 Contracts for difference and retail investors which ASIC described as the results of a “health check” into the over the counter CFD market. The Report contains conclusions that more needs to be done by issuers of CFD’s to ensure that investors understood the risks inherent in trading CFD’s, and also contains recommendations for future action.
Last month AUSTRAC released the annual Typologies and Case Studies Report for 2010. In these reports, AUSTRAC sets out case studies including factual scenarios arising from its enforcement activities during the period, for the purpose of assisting reporting entities to identify money laundering scenarios in their particular industry. There is one Case Study in this year’s Report which deals with a securities industry scenario relating to a “boiler-room” operation.
Our updated RG146 Superannuation course is highly recommended for anyone who advises on securities in self managed or other superannuation funds. Each month we will be publishing a short article covering a current superannuation topic written by Peter Grace the author of our new course.
If we learnt something in 2009-10 it is much easier to exceed the concessional contributions cap now that it has been reduced to $25,000 per person per year.
Here is a reminder of the rules. For most people, concessional contributions are all employer contributions (including those by salary sacrifice) and any contribution for which a tax deduction has been claimed. For anyone under age 50, the cap is $25,000 in a financial year for all concessional contributions made to any superannuation fund in the year. For anyone over 50 (by the last day of the year) the cap in until 30 June 2010 is $50,000.
Concessional contributions are taxable at 15% in a super fund but excessive contributions (those over the cap) are taxed at a further 31.5%.
In 2009-10, some hard lessons were learnt:
- High income earners found it relatively easy to exceed the lower cap (for example, if your salary is $250,000, contributions of 10% will do).
- People who had more than one job or work for an employer and for themselves commonly slipped up.
- People who changed jobs during the year forgot their last employer paid super on unused leave.
- Timing caught some people out (for example where contributions are paid late and boost the total for the next year).
It’s not getting any easier. The ATO has released Tax Ruling 2010/1 that defines a contribution as anything that increases the capital value of a super fund. As examples it suggests paying SMSF expenses without seeking reimbursement, improving a fund’s assets with your own money and performing a service for the fund for free are all effectively contributions.
In the old days before 2007 advisers and their clients would sweat on managing RBLs. Now the key is to manage contributions. Clients need to keep a record of all employer contributions and contributions for which they claim a tax deduction to avoiding the concessional contributions cap.
Peter Grace can be contacted on wordsandtraining@bigpond.com
The Australian Securities and Investments Commission (ASIC) has assumed responsibility for the supervision of financial markets from the Australian Stock Exchange (ASX) and other licensed markets.
On 1 August 2010, the Minister for the Minister for Financial Services, Superannuation and Corporate Law, the Hon Chris Bowen MP, approved the Market Integrity Rules on which industry has been consulted. These rules, together with the amended ASX and SFE operating rules, now form the regulatory rules for the new market supervision regime.
ASIC’s Market Integrity Rules can be viewed on ASIC’s website www. asic.gov.au/market-supervision. The ASX Rules are available on the ASX website.
Market participants will need to comply with ASIC’s Market Integrity Rules for market conduct and participant’s client and management arrangements. They are closely based on the previous ASX/SFE rules. Market participants will continue to be regulated by the ASX (or SFE) on operating, clearing and settlement rules.
Market participants will continue to contact ASX on operating, clearing and settlement rules issues. However you will now need to contact ASIC’s Market and Participant Supervision group for issues related to the Market Integrity Rules.
The Market and Participant Supervision group comprises five teams that will focus on real-time market surveillance, risk management, participant compliance and breach analysis and a Legal and Policy unit. We have written to each market participant to advise who is their ASIC relationship manager.
Regulatory Guide 214 outlines ASIC’s approach to the supervision of its Market Integrity Rules for the ASX and ASX 24 Markets and will help market participants comply with the new ASIC Market Integrity Rules.
Contact ASIC’s Market and Participant Supervision group if you have any concerns or issues related to market integrity or market operation.
ASIC’s Market and Participant Supervision group: 1300 029 454
Option 1 for real time market matters
Option 2 for other market related matters
Option 3 for Participant enquiries or matters
Option 4 for Market wide announcements
by emailing market.participants@asic.gov.au or by contacting your relationship manager
Transitional arrangements are in place such that all consents, waivers, certifications in place with existing Market Operators will be recognised by ASIC unless ASIC specifically advises otherwise.
ASIC has established a Markets Disciplinary Panel.
This Panel will function as a peer review body and has been established to deal with breaches of the Market Integrity Rules. It will exercise ASIC’s power to issue infringement notices and accept enforceable undertakings relating to breaches of the rules.
Ms Lisa Gay of Goldman Sachs JB Were has been appointed as Panel Chairman. The other initial members of the Panel are:
- Mr Richard Brasher (Associate Director, Equity Derivative Sales, RBS Equities Australia);
- Mr Ian Chambers (Head of Australian Equities, Morgan Stanley Australia);
- Mr Leigh Conder (General Manager, Financial Markets Operations and Equities & Margin Lending Operations, Commonwealth Bank);
- Mr Geoffrey Louw (Head of Futures and Forex, Bell Potter Securities);
- Mr Simon Gray (Director, Strategy & Corporate Finance, Shaw Stockbroking);
- Mr Michael Manford (Executive Chairman and Chief Executive Officer, Patersons Securities); and
- Mr Russell McKimm (Client Adviser, Patersons Securities).
All Panel members are also member of the ASX Disciplinary Tribunal. ASIC will appoint further individuals to the Panel as its work evolves.
ASIC held roadshows through July to update Market Participants on the transfer of Market Supervision. You can see a vodcast of ASIC’s Market & Participant Supervision Sydney roadshow at http://webcast.viostream.com/?viocast=2701&auth=75f5d971-6e1d-44de-b629-cc3f7c761862
You can also subscribe to receive regular updates from ASIC on the new regime (www.asic.gov.au/market-supervision).
ASIC is committed to ensuring best practice market supervision, market integrity and a fair, orderly and transparent market.
Instalment warrants provide advisers with a number of unique features such as the benefits of dividends and franking credits as well as leveraged exposure within SMSFs. Although Instalment warrants have a number of features that make them an attractive investment vehicle, many investors find it difficult to understand the key technical aspects of instalment warrants. Join ASX as they demystify the key technical aspects of instalment warrants as well as provide in-depth analysis on maintaining your clients’ position in various situations that may occur and strategies with SMSFs. Attendance is free and one CPD point is given upon attendance.
RBS MINIs allow you to trade a bull or a bear market without having to own the shares outright. There are no expiry dates and they offer a free stop loss feature that ensures you don’t lose more than your initial capital outlay. RBS MINIs mirror the performance of a share, index, currency or commodity, offering the benefits of trading shares without having to pay the full amount of the transaction. Join ASX and the Royal Bank of Scotland as they run through strategies and the features, benefits and risks of RBS MINIs. Attendance is free and one CPD point is given upon attendance.
Trading warrants are frequently used by traders to take advantage of trading opportunities in the market over the short-term. For a fraction of the price, Macquarie trading warrants allow you to trade a rising or falling market in equities, indices or currencies. They can also be used to manage risk on an investment portfolio. Join ASX as they run through strategies that can be used by advisers to take advantage of market volatility as well as protect a clients’ portfolio. Attendance is free and one CPD point is given upon attendance.
To register for these events, visit www.stockbrokers.org.au and click on the Training Calendar page under Education.
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