The Senate Economics Legislation Committee on Mon 16.6.2014, tabled its report on the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014. The Bill, which is still before the House of Reps, proposes changes to the Future of Financial Advice (FoFA) laws to, among other things:
- remove the need for clients to renew their ongoing fee arrangement with their adviser every 2 years (known as the “opt-in” requirement);
- make the requirement for advisers to provide a fee disclosure statement (FDS) only applicable to clients who entered into their arrangement after 1 July 2013;
- remove para 961B(2)(g) of the Corporations Act, the “catch-all” provision, from the list of steps an advice provider may take in order to satisfy the best interests obligation;
- better facilitate the provision of scaled advice; and
- provide a targeted exemption for general advice from the ban on conflicted remuneration in certain circumstances.
The Committee considered the best interests duty amendment (ie removal of para 961B(2)(g)) should proceed. Overall, the Committee majority recommended that the Bill be passed, subject to the Government giving due consideration to the following recommendations:
- The EM to the Bill include a paragraph that clearly and unambiguously spells out the best interests obligations – 961B(1) and (2), 961G, 961J and 961H – and the level of consumer protection they provide.
- The Government considers closely how these separate obligations work together and whether any further strengthening is required to ensure that a provider cannot circumvent these best interests obligations.
- The EM to the Bill makes clear that it is not the Government’s intention to reintroduce commissions.
- The Government [has] consider[ed] the provisions governing conflicted remuneration and redraft[ed] them to ensure there is greater clarity around their implementation.
- The Government g[a]ve consideration to the terminology used in the EM and legislation (eg s 766B), such as information, general advice and personal advice, with a view to making the distinction between them much sharper and more applicable in a practical sense when it comes to allowing exemptions from conflicted remuneration.
Labor and Greens Senators issued dissenting reports.
[LTN 114, 17/6/14]