The ACSA Board held planning sessions in February to review key systemic drivers and set focus areas for the Association for the coming year.The themes impacting the industry were grouped as:
The themes impacting the industry were grouped as:
Enablers/Disrupters – especially technology change. These require awareness and understanding, but ultimately are trends that ACSA cannot directly influence, and often proprietary in nature.
Landscape (geopolitical, environmental, macro sector, economic or social). These require awareness, understanding and dialogue, but again are ultimately beyond ACSA’s remit.
Focus – the themes that have direct impact to ACSA’s members and key client segments and are mission aligned. Three key themes have been identified:
Investment Shifts - allocations to private assets and ESG;
Regulation – changes to regulation and implementation;
Efficiency, Risk and Best Practice – driving systemic efficiency.
Member contacts will receive a summary of the strategy outputs in March. Communication to the broader industry will also take place at the Investment Operations Conference on 23 March 2021.
ACSA COMMUNITY
A warm welcome to Sean Gardiner who joined the ACSA Board in February 2021 representing J.P. Morgan. Sean is an Executive Director and heads up the Global Custody Middle Office for Australia and New Zealand.
Sean replaces Craig Twentyman who has been a member of the Board since November 2017. On behalf of ACSA, I would like to sincerely thank Craig for his service to the Board.
Congratulations to Nichole Alexander on her appointment as Chair of the Members & Services Working Group. Nichole is Manager - Client Service, Market Advocacy and Development with HSBC Markets and Securities Services.
Nichole takes on the role from Teri Thomas of J.P. Morgan. Thank you Teri for the ideas and enthusiasm you brought to the team.
Members & Services helps shape the way ACSA engages with members and other stakeholders. It is a clearing house for ideas, as well as providing support in execution for our key communications channels, including newsletter, website, socials and events. Please contact myself or Kate Dent to register your interest.
REGULATORY PIPELINE
A summary of current regulatory change:
Superannuation:
APRA Superannuation Data Transformation project.
ASIC has extended relief by amending the first reporting day for superannuation funds to disclose their portfolio holdings (PHD) to 31 December 2021.
Removal of partial exemptions to PHD (previously allowed on commercial and member’s interest grounds) as part of the Your Super, Your Future legislation.
Investment:
Reforms to the Foreign Investment Review Framework.
Government is implementing further reforms to strengthen the financial advice sector and provide consumers with better access to affordable and high quality financial advice.
Over-the-counter derivatives: Exemptions in relation to ASIC Trade Repository Reporting for OTC instruments granted until September 2022.
Other:
APRA Connect – replacement of Direct 2 APRA (D2A)
ASIC releases regulatory guide on product design and distribution obligations. The design and distribution obligations require issuers to design financial products to meet the needs of consumers, to distribute their products in a more targeted manner, and to report on how needs continue to align.
The summary has been broadly grouped by client sector, relevant to custody and investment administration. The list is not complete, and foreshadows what is likely to be a busy year of change on the policy and regulatory front.
ACSA’s Regulatory Working Group is engaged with review of changing legislation, preparing submissions on behalf of the Association, and in proactive dialogue with key regulators. Members are welcome to support this group, keep up to date and contribute to advocacy for positive change. Please contact myself or Kate Dent to register your interest.
TAX ROUNDUP
The Taxation Working Group has had a busy start to the year responding to active regulatory focus, judicial interpretations and policy trends.
Recent focus includes:
2020 Federal Budget submission.
ATO third party data tax controls consultation paper.
Board of Taxation - Review/simplification of CGT roll-overs.
Additional capital gains discount for affordable housing.
Low Report - Australia as a Finance and Tech Centre.
MIT/AMIT Streamlined Assurance Reviews.
Burton’s case ATO submission.
Swiss tax reclaims.
Martin’s case – including discussion with the FSC.
Calculation of AMIT deemed payments.
On the implementation front, the ACSA Tax Data sub-committee continues to refine the draft data template and market practice guide. The sub-committee plans to release the standard in March and promote dialogue with broader stakeholders on adoption pathways. A number of vendor firms are also involved in the initiative to bring data transport solutions to the service chain. Unanimous support has been provided by the ACSA Board member organisations.
Fund taxation is a complex area, and the new standard will continue to evolve on specific interpretive points. Agreement on the bulk of core data fields and common market practices are prerequisites to greater efficiency and lower risk in tax processing.
CHESS REPLACEMENT: PROPOSED CHANGES TO NETTING AND SETTLEMENT WORKFLOW
The ASX has released a consultation paper on proposed changes to netting and settlement workflow designed to deliver processing efficiencies and reduce subsequent messaging volumes as part of the overnight end-of-day process and daily batch settlement. Although mainly affecting brokers and clearing participants, there are potential implications for settlement only participants (direct custodians).
The ASX has hosted information sessions, and also settlement participant focus groups in early March to assist in understanding and commenting on the proposed changes.
A subcommittee of the Operations Working Group is reviewing the details and preparing an industry submission on the changes. Formal consultation responses are due to the ASX by 18 March 2021.
SKILLS IN DEMAND
In September 2020, ACSA hosted a virtual member event on Careers in the New Normal. An update relevant to this theme in the funds and custody space has been prepared by TOM Executive.
The figures show that the value of assets under custody for both Australian and foreign investors rebounded over the final six months of 2020 on the back of the global market performance.
Total Assets Under Custody for Australian Investors (AUD Billion)
Rank
Provider
30-Jun-20
31-Dec-20
% change
1
J.P. Morgan
820.2
973.2
18.70%
2
Northern Trust
561.5
660.9
17.70%
3
Citigroup
544.8
589.7
8.20%
4
NAB Asset Servicing
530.4
538.5
1.50%
5
BNP Paribas
463.3
475
2.50%
6
State Street
405.2
460.7
13.70%
7
HSBC Bank
179.8
196.1
9.10%
8
Clearstream
61.7
70.9
14.90%
9
Netwealth
31.5
38.8
23.20%
10
BNY Mellon
27.1
25.9
-4.30%
Total
3,753.80
4,029.80
7.40%
Source: Australian Custodial Services Association – Industry Statistics December 2020, Table 1
The rebound in assets under custody is a result of the bounce in market valuations that occurred over the second half of 2020 and ongoing client confidence in ACSA member’s custody and investment administration solutions.
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