The Assistant Treasurer on Wed 29.1.2014, released for public consultation draft regulations and legislation (and accompany explanatory materials) to enact the Government’s announced reforms to the Future of Financial Advice (FoFA) regime. Senator Sinodinos said although the Government was supportive of the FoFA principles, the previous Government’s reforms were “unwieldy, burdensome and unnecessarily complex”. He said the proposed changes “will reduce the burden on industry and pressures on the cost of advice to consumers”.
Consistent with its announcement on 20 December 2013, Senator Sinodinos said the Government’s key amendments include:
- removing the opt-in requirement;
- streamlining the annual fee disclosure requirements;
- amending the best interests duty to allow for scaled advice;
- exempting general advice from conflicted remuneration; and
- amending grandfathering to allow for adviser movements.
In order to provide certainty for industry and to ensure the measures have effect as soon as possible, Senator Sinodinos said the Government will implement time sensitive measures through regulations to the extent legally possible, with amendments to be subsequently made in the primary legislation. He added that the interim regulations (ie those made redundant by the passing of the legislative amendments) will be repealed once the legislative amendments have been passed, while those amendments best addressed via regulations will remain in place.
The Government intends that the regulations be made at the end of March 2014 and that a Bill be introduced in Parliament during the 2014 Autumn sitting period with passage scheduled for the Winter sitting period.
COMMENTS are due by 19 February 2014.
Source: Assistant Treasurer’s media release, 29 January 2014
[LTN 18, 29/1/14]
FoFA amendments: Options-stage Regulation Impact Statement released
On 20 December 2013, the Government announced proposed changes to the FoFA measures, with the aim of reducing the regulatory burden for the financial advice sector. The key reforms include:
- removing “opt-in” requirements (under which advisers would otherwise need to obtain their client’s approval every 2 years for ongoing fee arrangements);
- limiting annual fee disclosures to prospective clients only;
- removing a “catch-all” provision in the best interest duty, as well as providing a safe harbour for satisfying the best interest duty; and
- exempting general advice from the definition of “conflicted remuneration”.
The reforms are expected to have major impacts on the sector, including estimated average ongoing compliance cost savings of around id=”mce_marker”91m per year, as well as once-off implementation cost savings of around $88m.
An options-stage Regulation Impact Statement has been prepared by the Department of the Treasury to facilitate consultation. It outlines the options considered to implement the Government’s election commitment, and also details dissenting views. As the proposal relates to an election commitment, alternative options have not been considered. Further information on the FoFA policy development process in general is on the Treasury FoFA homepage.
[LTN 8, 14/1/14]