Apply Principles of

Professional Practice to
Work in the Financial
Services Industry
(FNSICIND401B)
Stage 2 – Finance and Banking

Dania El-Achmar
Fall 2010
 Unit Purpose
1. FNSICIND401B – Apply principles of professional
practice to work in the financial services industry
1.1 Identify the scope, sectors and responsibilities of
the industry
1.2 Identify and apply financial services industry
guidelines, procedures and legislation
1.3 Manage information
1.4 Plan work to be completed taking into consideration
time, resources and other constraints
1.5 Develop and maintain personal competency

2. FNSACCT404B – Make decisions in a legal context

2.1 Identify the main roles and responsibilities of the key
bodies of the legal system
2.2 Identify compliance requirements
2.3 Develop procedures to ensure compliance
 Assessments
No. Assessment Aspects of Evidence Weighting
Method
1 3-5 page Research paper which complies with the American 20%
research Psychological Association (APA) format on a specific
paper International Accounting Standard; a ministerial
decree which impacts the financial services and/or
accounting industries; or factors impacting the
guidelines, procedures and legislation governing the
financial services and accounting industries.
2 Project Using the submission date of an annual report for a 20%
publicly traded company, you will provide a plan to
manage the information and tasks for timely
submission of the annual report.

3 Group Group presentation that describes the licensing 20%

Presentation opportunities and requirements for auditors and
accountants in various countries across the work.
4 Group Group presentation on a specific law or regulation 40%
presentation related to financial services or accounting industries
including identifying the roles and responsibilities of
the legal body that imposes the laws, the identification
of specific compliance requirements, an example policy
to ensure compliance with the law or regulation and if
there are any consequences if your organization does
not comply with the law or regulation.
 Overview
• Accounting
– Accountants are employed in private businesses, charities and
government organizations. Their job is to record the monies going
into and out of the business and to analyze financial reports to
improve the profit, correct problems in the business or make
informed decisions about the proposal affecting the financial
positions.
• Insurance
– Insurance is simply protection against unforeseen events. Like
insurance of cars, businesses, health, houses and possessions.
• Lending Services
– Lending services can provide the additional money that people
might need for personal or business and it is called loans. There are
two parts to a loan:
• Principal and interest
– The amount of the loan is called the principal and the bank,
finance company or credit union lending the money charge
interest to earn their income.
– Usually the repayments of the loan pay the interest and some of
the principal, interest only loans are often used for short term
purposes.
 Overview
• Security
– For large amounts, the lender may want security or
collateral. That is; the lender wants to have control over
some of the borrower’s assets that can be sold off if the
loan can’t be repaid.
– A common form of security is a mortgage over a house or
land. And it is called a title deeds.
– Other assets can be used as security. If borrowing money
for buying a car the written loan contract may specify that
the car is encumbered, meaning that it can be seized by
the lender and sold to recover the debt if payments aren’t
made.
• Arranging a Loan: lenders will want to know your:
– Name, address and date of birth.
– Telephone numbers.
– Driver’s license details.
– Employment history.
– Income and assets (this requires pay slips or group
certificate).
– Credits and other references.
• Provide an identity and meet with the lender to sign the
legal documents.
 Overview
• Credit Management and Mercantile
Management
– Credit management firms are involved in
commercial or consumer debt recovery. One of
the risks that lenders take is that the borrower
can’t or won’t pay back what they have borrowed.
This may be due to unemployment, illness or
injury or bad money management.
– Mercantile management are responsible for the
Skip-tracing - locating missing persons (usually
debtors) who are attempting to evade collection of
past-due bills or judgments by collection agencies
or attorneys.
 Overview
• Superannuation
• Superannuation is a way f saving for
retirement. Under the Superannuation
Guarantee contribution employers are required
by law to pay a contribution into an approved
super fund for each employee. The
contribution is equal to 9% of the employee’s
wages, but is is paid by the employer, not the
workers.
• When a worker retires from the workforce they
can access the money that has been
accumulated in their super fund and receive it
as a lump sum or a monthly payment.
 Overview
• Retail, Industry and Self-Managed Funds
– The retail funds have a high profile due to their
marketing efforts. Household names like AMP
offer super facilities to employers along with
insurance, banking ad investment services.
– Industry funds are owned and operated by
industry groups or unions. They do not pay
commissions to sales people or advisors, and their
fees are generally lower than the retail funds.
– Self-managed super funds (SMSF). It means that
an individual can set up a ‘do it yourself’ super
fund and avoid the management charges and
overhead expenses of the retail and industry
funds. You need $100,000 to invest to get your
SMSF started.
• AMP: Australian Mutual Provident Society
 Overview
• Banking
– One of the biggest providers of financial services
is the banking sector.
– The main operations of banks include:
• Keeping money safe while also allowing
withdrawals when needed
• Providing cheque books so that bills can be
paid and payments can be delivered by post
• Providing personal loans, commercial loans,
and mortgage loans
• Issuing of credit cards and processing of credit
card transactions and billing
 Overview
• Allowing financial transactions at branches or
by using Automatic Teller Machines (ATMs)
• Provide wire transfers of funds overseas and
electronic fund transfers
• Services like standing orders and direct debits,
so payments for bills can be made
automatically
• Overdraft arrangements
• Supplying a cheque guaranteed by the bank
itself and prepaid by the customer, such as a
cashier’s or bank cheque
– Banks have diversified into other non-bank areas
like superannuation, insurance, stock broking and
investment services
 Overview
• Credit Unions
– Are financial co-operatives operating under a
mutual structure where members are both
customers and part owners.
– A credit union is a cooperative financial
institution that is owned and controlled by its
members and operated for the purpose of
promoting saving, providing credit at reasonable
rates, and providing other financial services to its
members. Many credit unions exist to further
community development or sustainable
international development on a local level.
 Overview
• Financial Planning
– This sector provides advice to individuals on investing,
superannuation, retirement and taxation.
– Planners may charge a fee for their services or they may
receive a commission for recommending certain
investments.

• Managed Investments
– Managed fund pools money from a large number of people
(investors) and buys a portfolio of assets across a range of
industries.
– The investors buy units in the fund, and the unit price varies
according to the value of the portfolio.
– The fund managers analyze businesses, trying to maximize
the value and earnings of the fund.
– The profits of their investments strategies are returned to the
unit holders as a cash payment or reinvested in more units.
– The investment company charges a fee for managing the
funds.
 Overview
• Credit Checking
– A lender wants to make sure that a potential
borrower has the ability to make the repayments
on a loan, and doing a ‘credit check’ or getting a
‘credit reference’ is on way.
– If there is any defaulter on a loan his/her details
will be stored for seven years for any credit
providers to assess whether or not to lend money
to that person or business.
– Another factors that are considered when
assessing whether to lend money are the
borrower’s income and expenses, other debts, the
purpose of the loan and employment history.
 Overview
• Finance, Mortgage and Insurance Broking
– A broker is a middle man who acts as a go-
between for a seller and a buyer. A finance broker
can arrange a loan for someone (the buyer) from a
finance company or a bank (the seller)
– Mortgage brokers specialize in arranging finance
for buying property for homebuyers, investors or
businesses.
– Insurance brokers find the appropriate insurance
cover for their client and offer cover for business,
home, life or motor insurance.
– In most cases there are no fees charged to the
client (buyer) for the service provided by a broker
of any sort. They receive a fee or commission
from the bank, finance company or insurer they
arrange the business with.
 Overview
• Conveyancing
– These are all the legal duties that need to be
carried out in order for the house purchase to go
through, such as: drawing up the contract that will
be exchanged with the seller; making sure there
are no planning permission or local development
issues regarding the property and register the
owner details of the property with the Land
Registry.
– The title of the property is checked and names
changes as required and any mortgages are
registered prior to settlement.
 Overview
• Risk Management
– Is the process of identifying risks to an
organization and trying to avoid, reduce or accept
some of the impact of the risk.
– In financial sector there may be the risk of
lawsuits as a result of bad investment advice to
clients, or breaking laws.
• Loss Adjusting
– Like law firms, insurance companies and
government departments.
– Checking for fraudulent insurance claims or
presenting claimant’s case for compensation or
damages.
 Overview
• Worker’s Compensation
– Employers are required to have insurance for
worker’s compensation. This insurance pays the
medical bills for employees who suffer injury or
illness as a result of their work duties, and pays a
percentage of their weekly wages while they are
off work.
– Businesses pay a premium to the insurance
company for the insurance cover, and the cost is
determined by:
• Type of industry.
• Number of previous claims.
• Number of employees.
– The premium is based on percentage of the wages
and salaries paid.
 Overview
• Financial Markets
– A financial market is a mechanism that allows
people to easily buy and sell (trade) financial
securities.
– There are different types of markets:
• Stock markets, which provide finance through
issuing and trading in shares.
• Commodity markets, which facilitate the
trading of commodities such as wheat, oil,
wool, some foods.
• Money markets, which provide short term debt
financing and investment.
• Insurance markets, which facilitate the
redistribution of various risks.
• Foreign exchange markets, which facilitate the
trading of foreign exchange.
 Overview
• Product Disclosure Statement (PDS)
– A PDS is a document listing full details of a
financial service so that prospective investors can
make an informed decision about whether or not
to buy it.
– Insurance companies are required to provide PDS
to individuals, businesses or when floating on the
stock exchange.
– For companies the PDS must detail:
• The anticipated risks and rewards of the
business enterprise.
• Financial projections and information about
the ownership.
• Management of the company.
 Overview
• Annual Reports
– It is produced at the end of the financial year.
– The report contains:
• Financial statements, including Statement of Financial
Performance (Profit and Loss), Statement of Financial
Position (Balance Sheet), and Cash Flow Statement.
• The chairperson’s or Chief Executive Officer’s report
commenting on the years performance and plans and
expectation for the coming year.
• A report from the Directors and information about their
backgrounds.
• A report from the auditors certifying that the accounts
are accurate and have been produced in accordance with
AASB Standards.
– AASB is The Australian Accounting Standards Board.
 Overview

• Business Names
– A trade name, also known as a trading name or a
business name, is the name which a business
trades under for commercial purposes, although
its registered, legal name, used for contracts and
other formal situations, may be another.
– No need for registration if you are trading under
your own name.
– A company name is registered through ASIC but
it needs to register its trading name in each state
it trades in.
• ASIC is Australian Securities and Investments
Commission
 Overview
• Capital Gains
– A capital gains occurs when an asset is sold for
more than the price paid for it. An asset can
include shares, real estate and machinery and
equipment.
 The Regulators
• Government in Australia
– There are three levels of government in Australia:
• Federal: The Australian or Commonwealth
Government is based in Canberra and has
responsibility for issues which affect the whole
country.
– Defense.
– Corporate Law.
– Quarantine.
• The Federal Government receives all of its
income from taxes like income and company
tax, and fees for services like passports.
 The Regulators
• State: State government deal with sectors which affect
individual states such as:
– Education.
– Police.
– Prisons.
– Provision of main roads.
– Public transport.
– Consumer protections laws.
• The states receive the GST collected in their state as
income, along with Federal grants and fees charged for
services.
• Local: The councils are responsible for rubbish
collection, building permits, libraries and building and
maintaining smaller roads and parks within their
boundaries. Many of these councils have expanded into
social welfare.
• The councils’ income is from rates charged on property
and fees for services and permits.
 The Regulators
• The Reserve Bank of Australia (RBA)
– RBA responsibility:
• Monetary policy. To control the percentage of inflation.
• Maintaining financial system stability and promoting the
safety and efficiency of the payments system.
• Set interest rates.
– The RBA operates independently of the government and make its
own decisions.
– The RBA reports to Parliament four times a year to explain its
actions and twice a year the Governor of the RBA appears before a
parliamentary committee to explain its decisions.

– Monetary Policy: The main aim of MP is:

• To maintain low and stable inflation.
• The stability of the currency of Australia.
• The maintenance of full employment in Australia.
• The economic prosperity and welfare of the people of
Australia.
 The Regulators
• Australian Prudential Regulation Authority
(APRA)
– “Prudent” means careful, sensible, wise, conservative,
exercising good judgment or common sense.
– Prudential regulation seeks to reinforce the role of the
managements and boards of financial institutions in
minimizing the risks in their business dealings and in
reducing the risk of loss by consumers.
– APRA is a Federal body which supervises all deposit-taking
institutions.
– One of the areas APRA is concerned with is capital
adequacy in insurance companies. (capital adequacy refers
to the amount of money an insurer must have on hand in
order to meet claims and the methods used to calculate how
much money is needed on hand).
 The Regulators
• Australian Securities and Investment
Commission (ASIC):
– It is an independent Commonwealth Government
body.
– IT is Australia’s corporate, markets and financial
services regulator.
– It plays a role in ensuring consumer protection
within the financial sector.
– Three areas that ASIC is involved in:
• Corporate regulation.
• Markets regulation.
• Financial regulation.
 The Regulators
• Corporate regulation:
– ASIC is responsible for ensuring that company
directors and officers carry out their duties
honestly, diligently and in the best interests of
their company and regulate:
• Company fundraising.
• Takeovers and schemes of arrangement.
• Audit and financial reporting.
• Market disclosure.
• Shareholder rights.
• Company administration and windings up.
• Registration of all companies and ensuring that
information about them is available efficiently
and quickly.
 The Regulators
• Markets regulation:
• They assess how effectively authorized
financial markets are complying with their
legal obligations to operate fair, orderly and
transparent markets, and advise the Minister
about authorizing new markets.
 The Regulators
• Financial services regulation:
– They license and monitor financial services
businesses to ensure that they operate efficiently,
honestly and fairly. These businesses deal in
superannuation, managed funds, shares and
company securities and insurance.
– ASIC has powers to protect consumers against:
• Misleading or deceptive and unconscionable.
• Conduct affecting all financial products and
services, including credit.
• With other regulators, they administer aspects
of legislation relating to insurance,
superannuation, retirement savings accounts
and medical indemnity cover.
 The Regulators
• ASIC also has an advisory and licensing role:
– Providing information and services about setting up,
running and closing a company and the types of records that
must be kept and the information that must be lodged.
– Licensing and registering, they license financial services
businesses and register auditors and liquidators.
– Maintaining public registers, maintain a public database of
Australia’s 1.4 million companies. They also keep public
registers of:
• Holders of Australian financial services (AFS) licenses
and authorized representatives of AFS licensees.
• People who have been banned from providing financial
services.
• Registered auditors and liquidators.
• People banned or disqualified from managing a
company.
• People who have given enforceable undertakings.
• All disclosure documents for securities.
 The Regulators
• ASIC has power to take legal action against those
who breach its laws. The sorts of actions they will
act against include:
– Misconduct by company directors or officers, auditors or
liquidators.
– False, incorrect or late release of company information to
the market.
– Insolvent trading by a company.
– Misconduct in takeovers, company restructures or
fundraising.
– Inappropriate financial advice.
– Misleading or deceptive and unconscionable conduct in
relation to financial products or services.
– Financial scams and illegal investment schemes.
– Can take legal action which may result in fines or jail
against company directors who break the law.
WEEK 2
 Other Authorities
• The Australian Securities Exchange
Limited (ASX) or stock market, is where
shares in companies and other financial
products are traded. If you wish to buy or
sell shares you need to deal through a
stockbroker who places your order and the
price you are willing to pay on the
computerized system known as CHESS
(Clearing House Electronic Subregister
System).
 Other Authorities
The Australian Tax Office (ATO)
• The ATO collects revenue for the Federal
Government and administers laws relating to all
forms of tax and excise. The money collected is
passed onto the various federal departments such
as Health and Defence to fund their operations.
• It is a part of the Federal Treasurer’s portfolio,
and some of the areas it is responsible for include:
– PAYG tax – Pay As You Go is the income tax paid by wage
and salary earners.
– PAYS instalments tax – self-employed people pay income
tax by instalments each pay day.
– Company tax – companies also pay tax based on their net
profit. The current rate is 30%.
– GST – The goods and services Tax is a broad-based tax
charged at the rate of 10% on the sale of most goods and
services in Australia.
 Other Authorities
The Australian Tax Office (ATO)
– GST is charged at each step in the supply chain from
producer to customer, with registered businesses
including GST in the price of goods and services they
sell. Businesses pay GST when they buy goods or
services and charge GST when they sell their products
or services and then receive a credit for the GST they
have paid.
– Fringe Benefits Tax – this is a tax on benefits provided
to employees by their employer. For instance, a sales
representative may be provided with a vehicle
including petrol, insurance and maintenance by his or
her employer and be allowed to use the car for private
travel. The portion of private travel is classed as a
Fringe Benefit and the employer pays tax on that. The
rationale is that the worker does not have to pay for
their own private vehicle so the company car is a
“benefit to them”.
 Other Authorities
The Australian Tax Office (ATO)
– ABN – The Australian Business Number is a
unique number which identifies a business, and it
is compulsory if a business is registered to GST.
Not every business needs an ABN but not having
one complicates payments from customers.
– Example: a business that buys goods or services
from another business that does not have an ABN
must deduct 46.5% off the payment to the seller
as withholding tax and forward that tot the ATO.
Therefore, the seller only receives 53.5% of their
invoiced amount and the buyer has extra
paperwork to deal with.
 Other Authorities

• Australian Business Register (ABR) – The

ABR is a database of information provided
by businesses when they register for an ABN.
The ABR provides online access to ABN
details and allows businesses to:
– Check and verify information such as goods and
services tax (GST) registration statues of other
businesses for ordering a tax file number.
– Register for an ABN and other tax obligations such as
GST and PAYG.
– Apply for a tax file number.
– Access, update and cancel ABN details.
– Tax Agents’ board – Only registered tax agents can
charge a fee for preparing a tax return, and the ATO
maintains a register of them.
 Other Authorities

– BAS – The Business Activity Statement is the

form used to record and pay a business’ tax
obligations. PAYG taxes and the GST are
reported on the BAS. There are restrictions on
who can charge a fee for preparing a BAS.
– The Administration of the SGC superannuation
laws is carried out by the ATO along with the
rules applying to self-managed superannuation
funds.
 Other Authorities

• The ATO operates an extensive web site

with many functions able to be done on
line, and there is access to explanations of
taxes and rulings and amendments. If
people break the laws relating to the
payment of taxes the ATO can take legal
action to recover the money and impose
fines or prison terms.
 Other Authorities

Department Of Finance:
• The department of finance and
deregulation (finance) plays an important
facilitation role at the centre of the
Commonwealth Government. Finance
helps the Government achieve its policy
objectives by contributing to four key
outcomes.
– Sustainable Government Finances – Assisting the
government to meet its fiscal objectives through
activities such as providing whole-of-government
advice on expenditure policy, help prepare the
Australian Government budget, and providing
whole-of-government financial reporting.
 Other Authorities

– Improved and more efficient Government

operations providing business services such as
managing the Australian Government’s self-
managed insurance fund.
– An efficiently functioning Parliament –
providing support to parliamentarians and their
employees including management of travel and
other entitlements.
– Effective and efficient use of information and
communication technology by the Australian
Government providing strategic advice, guidance
and service provision for the productive
application of new and existing information and
communication technologies to government
operations.
 Other Authorities

The Budget
• The Budget explains the Government’s
and taxation plans for the next financial
year (July 1 – June 30).
• It specifies how much each Federal
Government department will spend and
outlines major expenditure items.
 Other Authorities

The Treasury
• The treasury provides advice to the
Government on a range of matters including:
– Economic, fiscal and monetary policy.
– Taxation.
– Public borrowing.
– International finance and foreign exchange.
– Financial sector policy.
– Currency and legal tender.
– Foreign investment in Australia.
– National and occupational superannuation.
– Business law and practice and corporate and
securities law; corporate insolvency;
– Competition policy and prices; consumer affairs
– Valuation services.
– Commonwealth-state financial relations.