The Acting Assistant Treasurer on Fri 20.6.2014, set out how the Government intends to proceed with its proposed amendments to the Future of Financial Advice (FoFA) legislation. Senator Cormann said that the Government remains committed to implementing its FoFA amendments which seek to “strike the right balance” between protecting consumers and relieving the regulatory burden on the financial services sector.
Broadly, the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014, which is still before the House of Reps, proposes to:
- remove the “catch-all” requirement from the best interests duty,
- remove the opt-in requirement,
- simplify the annual fee disclosure statement rules,
- exempt general advice from conflicted remuneration and
- revise the grandfathering provisions.
The Government said that it intends to proceed with the proposed amendment to remove the final catch-all step from the best interest duty in s 961B(2) of the Corporations Act. Senator Cormann rejected claims from some quarters that the proposed changes would somehow water down the best interest duty. To this end, he noted that the requirement for a financial adviser to act in the best interest of his or her client will remain in place. An adviser must also still satisfy the other existing FoFA obligations to ensure that advice is appropriate and prioritise the interests of the client ahead of their own. While the Bill provides that certain incentive payments related to the provision of “general advice” are not conflicted remuneration, the Government said that it has never sought to re-introduce commissions. To put this beyond doubt, the Government will prescribe that any payment related to the provision of general advice cannot be an upfront or a trailing commission. In addition, the Government will put in place regulation-making powers that may prescribe circumstances in which all or part of a benefit is to be treated as conflicted remuneration.
The Government said that it will implement its time-sensitive FoFA changes through regulations (where legally possible), with effect from 1 July 2014. These include:
- the removal of the opt-in requirement and
- the catch-all provision from the best interest duty,
- removing the requirement for fee disclosure statements to be sent to pre-1 July 2013 clients,
- supporting the provision of general advice and scaled advice,
- balance scorecard incentive payments and improvements to grandfathering.
Changes that will be progressed through amendments to the Corporations Act via the Bill include a clarification on volume-based shelf-space fees, extending the time period advisers are required to send a fee disclosure statement from 30 to 60 days after the client’s anniversary date, and expanding the regulation-making powers.
Source : Acting Assistant Treasurer’s media release, 20 June 2014
[LTN 117, 20/6/14]