Financial Services Legislation

Financial Services Legislation & Compliance
Assessment V3.4 © AAMC Training Group A1
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Assessment name Financial Services Legislation & Compliance Assessment
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Checklist of attachments:
Task 1 – Case study questions
Task 2 – Workplace project
Task 3 – Short answers/Activity
Task 4 – Workplace project
Task 5 – Activity
Task 6 – Workplace project
Task 7 – Research
Task 8 – Research
Task 9 – Short answers
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Financial Services Legislation & Compliance
A2 © AAMC Training Group Assessment V3.4
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This assessment relates to the following units of competency:

FNSINC401 Apply principles of professional practice to work in the financial services
FNSFMK505 Comply with legislation and industry codes of practice

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Financial Services Legislation & Compliance
Assessment V3.4 © AAMC Training Group A3
Task 1 – Case Study
As part of managing your professional development and maintaining currency, you read many
industry articles. You received this following article from Industry Media and decided it might
be a good one for yourself and the other finance brokers (authorised credit representatives)
of DNZ, in order to understand the industry better.
The historic low interest rate of 1.5% which remained the same after nearly two years, is
expected to increase “at some point,” according to Philip Lowe, Governor of the Reserve Bank of
Australia (RBA). Economist Warwick McKibbin concurred stating that this has been shown by the
local economic and political climate. The increase is predicted even in global standards as an
effect of the rise of climate change policies, digital disruption, and the overall changing global
Due to low inflation, lack of growth in wages, and job insecurity – the present interest rate has
failed to catch up with the global interest rates. These in turn mean that household spending is
not enough to push the economy forward.
While the RBA is able to influence most interest rates in the economy, and in turn manipulate the
demand for borrowing, the banks are assumed to pass the cost on to borrowers. The banks
endeavour to shoulder the costs of borrowing funds within their business before passing it on to
borrowers via loan repayments.
As the RBA and banks determine the cash rate and interest rates, they do not solely govern the
behaviour of the financial services industry.
While this is so, there is the call to prepare for the rate hikes. It is best for borrowers to sort out
their finances ahead of time and be mindful of the industry’s climate, so that they are aware of
interest rate movements. If it is possible, park spare cash in an offset account or use it for paying
down the loan.
Case Study questions:
1. You have asked the finance brokers (ACR’s) in the DNZ business to consider the article
above which will also help them to better explain to their clients and referrers about
external impacts that may affect borrowing. Referring to the article above and the AAMC
Training learner guide, identify a minimum of three
external forces that could influence
the move in interest rates and that also dictate the economic and political climate in
relation to the financial services industry.
2. What are the two
financial services sectors that are involved in influencing interest rate
movements and how do they interrelate?

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Task 2 – Workplace Project
1. Paul has asked you to write a staff memo to update everyone on the recent changes and
impact of the Australian Financial Complaints Authority (AFCA) on organisational policy,
guidelines and procedures.
Using the template below and considering the key points, write the office memo in
than 500 of your own words*
Refer to the AFCA website to locate relevant
information found under

Dear colleagues,
*Who are AFCA and what are the benefits of AFCA membership?
*What are the key points that you have to consider in communicating information
about AFCA?
*What does the AFCA Code Compliance and monitoring team support and administer?
(Found under Codes of Practice)

2. Paul Williams has asked you to update the DNZ Credit Guide with the correct wording
about AFCA. What information should be available to consumers on both the website and
in the credit guide? Reference: “Letting your customers know about AFCA”.

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Assessment V3.4 © AAMC Training Group A5
Financial Services Legislation & Compliance
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Task 3 – Short Answers/Activity
Read the following article and answer the relevant questions.
The broker’s guide to CCR
Having a complete picture of a borrower’s financial position promises many benefits for lenders, brokers
and borrowers alike. With comprehensive credit reporting on Australia’s doorstep, The Adviser speaks to
industry participants about how brokers can prepare for and make the most of the new regime.
The mandatory comprehensive credit reporting (CCR) regime – which requires lenders to provide access
to customer credit data, such as repayment history, credit limits and types of credit accounts – is being
lauded as a revolutionary step in the lending process that could facilitate improvements to credit
decisioning, credit availability, operational efficiency and competition, if implemented effectively.
What is CCR?
The National Consumer Credit Protection Amendment (Mandatory Comprehensive Credit Reporting) Bill
2018, which was introduced into parliament mid-last year, requires lenders to report positive credit
information, such as when minimum payments on a credit card, mortgage or personal loan are being
made on time.
While the bill has been put on the backburner a number of times, the financial services industry has
been making progress in adapting to the new regime. By the end of September 2018, which was the
government-imposed deadline for the major banks to insert 50 per cent of their CCR data into a data
exchange system, the big four banks, along with Citibank, HSBC, Teachers Mutual Bank, RateSetter and
MoneyPlace had become participants in the regime.
The government said that 100 per cent of CCR data would need to be shared by the big four banks by
the end of September 2019, and the deadline for other lenders are 12 months after the major banks.
It is believed that CCR will allow all participating lenders, including non-banks and fintechs, to better
assess the risk status of a loan applicant
From risk to opportunity
As Standard & Poor’s (S&P) notes in its report, Australian Structured Finance: Credit Analysis in a Digital
Ecosystem: “Having access to data on borrowers’ financial commitments and the deployment of data science
to analyse it will enable lenders to make a more accurate assessment of expenses, resulting in more prudent
“It will also facilitate greater consistency in debt-serviceability assessments.”
S&P predicts that an open data model will reduce the financial services industry’s reliance on time-intensive
manual processes, because a greater amount of information will be quickly and easily obtainable.
Peter Beaumont, head of growth at ASX-listed peer-to-peer lender Wisr, notes that, traditionally, the onus
has been on the borrower to provide information on how they managed their liabilities across a recent time
“Increased transparency… will have a huge positive contribution on business productivity along two
dimensions: one is avoiding wasted time and the other is around improved customer understanding,”
he says.
“Having CCR historical payment data regarding their liabilities allows [brokers] to better assess the facts
around the clients.”
Observing that “many people… don’t tell [their broker] everything”, Anthony Azar, principal at Fenero
Bespoke Finance, says CCR will open opportunities to have deeper discussions with clients, allowing brokers
to understand early on the risk status of the client and the likelihood of them being successful in obtaining a

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Assessment V3.4 © AAMC Training Group A7
“[It will] allow you to see whether the loan can be done based on the [customer’s past conduct] or whether
you need to do the loan through second-tier [lenders], rather than push that through to first-tier [lenders]
only for it to bounce back [due to] an issue you weren’t aware of,” he says.
CCR may allow some Australians with black marks on their credit report to not be disadvantaged due to past
financial hardships.
“It could be somebody whose credit profile appears quite weak but CCR history tells us for the past two
years they’ve had three credit facilities and met every payment on time. That can have a significant influence
on a lender’s preparedness to lend,” Mr Beaumont says.
Conversely, Mr Beaumont says someone with a high income and numerous assets might present as low risk,
but CCR data could show that there is a history of missed payments and overspending. The broker will be
able to understand that the client is weaker than they initially thought and may need guidance before they
take on additional liabilities.
Mhairi MacLeod, founder and principal at Astute Ability Finance Group, says brokers who work with clients to
improve their credit history, such as through better budgeting, and teach them the importance of good credit
conduct “will be laying strong foundations for a client for life”.
She believes CCR will also enable more product innovation with wide-ranging benefits for customers.
“These changes will create wide-ranging competition for consumers across all forms of finance and allow
lenders on all product lines to compete against the majors on a more even playing field,” Ms MacLeod says.
Getting ready
Meanwhile, Mr Azar also suggests CCR could enable the creation of the “first straight-through home loan
approvals without human intervention”, adding that he thinks the regime will favour the fintech segment.
Once the CCR system is widely embraced, Mr Azar says “the first step of any deal will be to look at [client’s]
information” to get a better understanding of their true financial positions. This will determine the approach
that is taken by the broker and the client to achieve a positive outcome.
“You look at [the client’s] information and you might say, ‘You’ve got a bad record’ or ‘Here are three or four
lenders that could help and this is going to be the cost of funds and are you amenable to that interest rate?’
This is [rather than] running around in circles and doing all the work and realising it’s not bankable or it is
bankable but the interest rate is not amenable to the client,” he says.
According to Mr Beaumont, it will be important for brokers to understand every lender’s implementation
roadmap as there will be varying time frames for them to update their credit decisioning processes.
He notes that lenders, particularly fintechs, are rolling out their own products using the newly available data
for brokers and other partners to use, though brokers can also purchase the data directly from credit
Further, Mr Beaumont suggests that it is crucial that brokers understand how lenders will process CCR data
and what impact the data will have on their credit decisioning processes.
“As a broker… if you have a client who has a series of previously missed payments on their personal loan, as
evidenced by the CCR data, you need to ask yourself, ‘Does the lender who you’re proposing to introduce
this new loan to care about this? How are they going to react when they see the CCR data?’”
Mr Azar agrees, noting the decisions lenders make based on the same data will differ.
“There are lenders that have zero tolerance [for missed payments], some that have a dollar value tolerance,
and some that have a historic tolerance. They will have different views on, for example, what’s an acceptable
event of default. [Brokers will] need to be across all of this,”
he says.

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Aggregators and lenders are already playing a role in supporting their brokers in this area of education,
according to Mr Beaumont, who says some are providing CCR training and a credit bureau access service
through their own portals.
He says brokers should be cognisant that data quality in the initial stages of the regime will not be perfect,
but it will improve over time. As such, lenders also need to ensure, especially with negative CCR data, that it
is “correct and not a function of a poor upload from a recent contributor”.
“I would say for 2019, in the consumer space, CCR is essential knowledge that a broker must get a grip on
to do the right thing by their client.”
Ms MacLeod agrees, recommending that brokers seek relevant education and training to “ensure they are in
a position to offer clients the best possible advice”.
Referenced from:
Task 3 Questions:
Paul has asked you to review the above article and consider the ongoing changes to
comprehensive credit reporting which is highly important information for staff and customers.
He has also asked you to ensure staff knowledge across the article in relation to operational
procedures and processes accurately reflect these changes. He has mentioned that linking to
the Equifax website and other industry related information is a good way to remain up-todate with ongoing changes.
Also, there are many ways to let clients know more about CCR and changes – see sample:
1. What are the procedural implications of CCR on your organisation’s operations?
2. How might you stay up to date with changes in CCR or any other regulations?
3. What would be a good method and time frame for updating finance brokers (your staff)
and clients regarding these changes? You may wish to place your answer in a table similar
to the one below.

Who How By when

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Assessment V3.4 © AAMC Training Group A9
Task 4 – Workplace project
Due to increased workloads, Paul has hired new broker, Shona, on a subcontract basis and
she will undergo 24 months of mentoring. Shona was formerly a loan processor in her
previous role and already holds an FNS40815 Certificate IV in Finance and Mortgage Broking
1. As an initial measure to implement a successful monitoring of the authorisation process,
discuss with Shona the procedures a responsible manager has to undergo to authorise her
as an Authorised Credit Representative (ACR) with ASIC. This process forms part of the
agency agreement required under ASIC between Licensee’s and their authorised
representatives. Using the table below, complete the process of authorisation
a. Undertake background checks on that representative.
b. Ensure that they are
adequately trained to engage in credit activities.
c. Ensure that they have
current external dispute resolution (EDR) scheme
before the authorisation is given.
d. Provide
written consent to the appointment.
e. Ensure they have adequate systems and procedures in place to monitor and supervise
their representatives (see
Monitoring and Supervising representatives).

Membership to
an EDR scheme
Written consent
Monitoring and

2. Shona has asked you the difference between registering under an ABN versus an ACN. In
your own words describe what they are and how they differ. Information may be found on
Wikipedia, or similar resource.
3. Shona would also like some advice from you regarding when she should register for GST.
Explain the process for registering for GST, including who needs to register and when.
Information may be found at or
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Task 5 – Activity
As the Responsible Manager you role is to determine and plan work to be completed by the
finance brokers and team. As part your discussion with Paul, you have both decided that the
Finance Brokers (ACR’s) need to undertake some further training to increase personal skills,
make a more cohesive team and ensure service improvement. The training will contribute
towards their professional development hours required for association membership and to
meet ASIC requirements. This training should take place as soon as possible and needs to be
completed within the next three months. To kick off the training (and lead by example) you
have decided to commence with planning some training for yourself.
1. Identify three personal competency goals you would like to achieve in your role that would
enhance your organisation’s image. Explain how you can go about developing the skills
needed to achieve your goals and your ideal timeframe for completion. You may wish to
use the responsible manager profile in the
FMB Assessment Toolkit or choose your own

Performance Objective Required Skills Current Skills Time frame to
Example: Become a leader in
my business
Learn leadership skills No leadership experience First 12 months

2. Referring to ASIC RG206, what are the minimum continuing professional standards for
responsible managers? Include in your answer:

the required number of hours
how often your professional development should be completed, and
what these activities should consist of.
3. Based on the “Credit Representative Profiles” in the FMB Assessment Toolkit, and using
the table below, complete a training needs analysis for each individual.

Individual Performance Objective Required Skills Current Skills

4. Using the “AAMC Training Course List” from the FMB Assessment Toolkit, determine
which training will need to be completed by each ACR, whether it will be individually
completed or as part of a team, and where the training will take place.

Financial Services Legislation & Compliance
Assessment V3.4 © AAMC Training Group A11

Individual Course Method of
Time frame to
Offsite or in

5. How could you ensure that your contribution serves as a role model to others and in turn,
enhance the organisation’s image? Refer to Module1, Section 6.
6. Briefly explain how you would actively encourage individuals to participate in, take
responsibility for and effectively communicate in team activities. Refer to Module 1,
Section 5 of the learner guide.
7. Shona is having issues learning the company’s CRM system and has a loan ready to
submit. Referring to the
FMB Assessment Toolkit, answer the following questions:
a. What learning should Shona complete in order to adapt to the system and when can
she complete this?
b. Which team members should be able to also provide support to Shona regarding the
8. Paul has asked you to provide some feedback to the team regarding the training
outcomes. The team performed the tasks well and you would like to make sure you value
and show encouragement towards their performance. How would recognise and reward
individual and team efforts?
9. Paul has advised that the company are now using AAMC Training’s LMS to record CPD
hours. Using the AAMC Training CPD area (this is an option in your AAMC member area
Professional Development Record CPD/CE) or by creating your own PD Statement
(based on the AAMC Training example below) record a minimum of 20 hours of
professional development activities that you may complete as a finance broker. Refer to
the professional development section of the
FMB Assessment Toolkit (under company
professional development activities or AAMC Training courses). You may also choose some
of your own activities.

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Financial Services Legislation & Compliance
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Task 6 – Workplace Project
1. Paul would also like the team to attend a “First Home Buyer” event in hope to gain some
new business. Your role is to determine what tasks would be allocated to whom within
the business to get set up and have enough people on your stand throughout the day.
The following answers are ‘free thinking’ questions and thus the learner guide or
assessment may not contain the answers.
Not everyone needs to be involved but, you would like to ensure all the brokers get the
opportunity to attend the event. Consider the variables and write down the tasks/
requirements into the planning table below in order of priority. Your task should be based
on looking at the skills of all staff in the office (as detailed in the
FMB Assessment
The event is happening at the Melbourne Convention Centre in two months’ time and you
have been advised that any items for the stand must arrive two days beforehand.

Organise for marketing materials, prizes and banners for stand
Setting up the stand

Packing up the stand after the event
Maximum of two staff to attend the event (at any one time) and be on the stand per
session 9am to 12pm & 1pm to 5pm. You should consider having different personality
types to ensure that sales are being made consistently.
Organise the courier to pick up the marketing materials for delivery to the venue


Task Action Who To be completed by

2. All of your team members did really well in achieving some good interest at the event.
To prove that you value their efforts and to offer encouragement for future tasks, you
have decided to provide rewards. Explain ways in which you could reward individual and
team efforts.
3. You really want your team to get as many new prospects from the event as possible.
What is a process or idea you may be able to use to encourage the team to participate?

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Task 7 – Research
1. As part your own professional development, serving as a positive role model and teaching
others, you have decided to review the MFAA Code of Practice. This will ensure a thorough
understanding and future training standards. Explain the general standards of the code.
2. As part of maintaining and ensuring compliance, you have decided to check and
categorise all statutory records accordingly. Under each of the headings below, list at least
three types of registers that you believe fit the relevant category. Refer to the
Assessment Toolkit
and/or Module 1, Section 8 of the learner guide to assist with your

Recording Registers Records and Certificates Policies and procedures

3. You are auditing one of the teams’ Product Disclosure Proposals and need to discuss it
with them before they hand it to the client. You’ve noticed (ongoing) commission is shown
as an annual figure instead of monthly. The loan was for $320,000.

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Fees and commissions
Fees payable to us for
the provision of broking
We do not charge any fees for our service. We get paid commission from the
[OR – remove as appropriate]
Our service fee is $ (including GST) or % of the finance amount,
for arranging finance on your behalf. The fee is payable on approval of your
[You cannot charge a fee before you provide credit assistance]
Fees payable to third
There are no fees or charges paid by us to third parties. [OR – remove as
example ‘paid to XYZ Company for arranging valuation’]
The fee is payable when required by the third party.
Estimate of commission to
be received by us. This
commission is payable to
us for assisting you to
obtain finance.
.65% of the amount of the principal finance amount shortly after the finance
is provided. We estimate this to be
.15% per annum of your outstanding loan amount owing payable monthly.
We estimate the largest monthly payment to be
These amounts are inclusive of GST.
Commission will be paid
The commission will be paid by the lender documented above to the
licensee. The licensee will then pay some or all of the commission to the
credit representative.
Other benefits From time to time we receive benefits in the form of conferences and
training sessions provided by the licensee, financiers, or others. The value
of these benefits cannot be ascertained.
Estimate of total fees and
charges payable to the
financier in relation to
applying for the finance.
These fees are payable
by you.
Application/Establishment fees $500
Valuation fees $350
Legal/Documentation/Settlement fees $800
Lenders mortgage insurance premium $
Other $
Total $
These figures are estimates only and the final figures will be shown in your
credit contract or lease. Some or all of these fees may be paid from the
finance proceeds.
These fees are payable only once.
We are not aware of any other fees or charges payable to anyone else in
relation to the application for finance, but the financier may impose some
additional requirements.
Referral fee In addition, we receive referrals from a broad range of sources. For
example, we may pay fees to call centre companies, real estate agents,
accountants, or lawyers for referring you to us. These referral fees are
generally small amounts and accord with usual business practice. These are
not fees payable by you.

Total fees and charges paid by us to third parties are $ (including
GST). The fees and charges are paid to for arranging .
The credit representative has paid or will pay a referral fee of $ to
for referring you to us.
Using the table below correct the commission amounts.

Estimate of commission
to be received by us.
This commission is
payable to us for
assisting you to obtain
.65% of the amount of the principal finance amount shortly after the
finance is provided. We estimate this to be $
.15% per annum of your outstanding loan amount owing payable
monthly. We estimate the largest monthly payment to be $
These amounts are inclusive of GST.

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Task 8 – Research
The “2017 Sustainability Report” of the National Australia Bank details the bank’s strategies on
Corporate Responsibility and its performance over the said year. It contains the organisation’s
own version of sustainability principles how they have responded to environmental, social,
governance and economic responsibility.
1. Access the above link to the 2017 Sustainability Report, specifically the table found on
pages 9-12. Choose one
material theme from each of the three major criteria for
measuring profitability –
social, environmental, and economic.

Social Economic Environmental

2. In your own words, using the table below complete each of the areas:
a) The impact/s on the different participants in the financial services industry.
(Stakeholder view and relevance to NAB)
b) The practices, strategies, and policies that are incorporated in that material theme.
(How we’re responding)
c) The outcomes have been reported from the incorporation of those material themes.

Three major
criteria for
NAB’s version of
(Material Theme)
Impact on industry
(Stakeholder View
and Relevance to
NAB’s Activities
(How We’re
NAB’s Corporate

3. You and chosen members of your team have been tasked to create your own corporate
sustainability framework, incorporating and supporting triple bottom line principals.
Highlight at least one goal, under each of these headings that you would like to achieve
for the business.
Astute Ability Finance Group’s Corporate Responsibility approach found in this website: is an example that you may use as a

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Areas of the business Sustainability goal
Your customers
Your staff
The community
The environment

4. Based on your goals, highlight the potential economic outcome/s on your business and the
greater community.

Sustainability goal Economic outcome/s

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Task 9 – Short Answers
1. List at least three of the main sectors of the financial services industry that may impact
your role as a finance broker.
2. In your own words, briefly explain the memorandum of understanding between ASIC and
Refer to this ASIC link to assist you with the answer:
Paul Janes has a tiling business and has earnt $90,000 for the most recent financial year. His
wife Melanie works at Coles Supermarket on a part time basis and she has been promised the
position of Store Manager, likely to earn $20,000 more than what she is currently earning.
The couple are in their mid 40’s and have a son living at home. They have a current home
loan of $250,000. They are seeking a personal loan from you for an overseas trip of $50,000.
The couple have approximately three credit cards.
3. What are two or more qualifying questions you should ask the clients in the above scenario
to clarify their financial situation?
4. Why is it important to make reasonable enquiries about a client?
5. Why is it important to take steps to verify a customer’s information?
SCENARIO – Anti-money laundering & counter terrorism financing
Sam Knight contacted you about obtaining a car loan and, as part of providing documents, he
sent you uncertified copy of his driver’s licence.
6. What are your obligations under AML/CTF legislation in reference to Sam’s identification?
(Refer to section Module 1, Section 2 of your Learner Guide – Money laundering and
terrorism financing.) Explain the requirements of the customer identification and
verification process.
7. Sam has also provided his tax assessment notice as evidence of his income for the loan
application. As you have another Sam Knight (Samantha) on your books, you are

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wondering whether you could perhaps file each of the “Sam’s” by their tax file number for
easy identification in the future. Referring to the use and disclosure of tax file number
information found under Module one, Section 2 of the learner guide, provide an
explanation as to whether this is acceptable practice.
Maddison and Andrew (clients of yours) entered into a consumer loan with ABank. They have
just been advised that Maddison is very unwell and has had several months off work. Her
employer recently advised that they could no longer hold her job. As a result the couple have
been struggling to meet their mortgage repayments and have fallen into default many times.
They have provided a hardship application to the lender. Refer to the hardship provisions
under responsible lending conduct obligation in Module 1, Section 2 of the learner guide.
8. Explain what the lender must do within 21 days of receiving the hardship application.