The Government announced on Thur 15.3.2012, that the start date for the mandatory application of the Future of Financial Advice (FoFA) reforms will be deferred to 1 July 2013. The Minister for Financial Services and Superannuation, Bill Shorten, said the FoFA reforms will still commence from 1 July 2012 (as originally announced) but the application of the provisions will be voluntary until 1 July 2013. Mandatory application will start from 1 July 2013, Mr Shorten said.
The Minister said that any business that wants to start complying with the reforms from 1 July 2012 will have the opportunity to elect to do so. From 1 July 2013, the entire industry will be required to comply. Mr Shorten said the Government has listened to concerns from the business and financial planning community that they need more time to prepare for these changes. This timetable also balances consumer needs, as it gives early industry movers the opportunity to provide commission-free products from 1 July 2012, the Minister said. The Government said it will continue to work with all stakeholders to ensure the FoFA reforms are implemented in the most cost-effective way possible in the best interests of consumers. (Source: Minister for Financial Services and Superannuation media release No 013, 15 March 2012.)
The Minister’s announcement follows the release on Wed 14.3.2012, of the Senate Economic Committee’s report on the Corporations Amendment (Future of Financial Advice) Bill 2011 and Corporations Amendment (Further Future of Financial Advice Measures) Bill 2011. Broadly, the Bills seek to implement the Government’s FoFA reforms, including enhanced annual fee disclosure rules, a requirement for financial advisers to obtain client agreement for ongoing advice fees every 2 years (an “opt-in” requirement), a statutory best interests duty for financial advisers, a ban on conflicted remuneration and volume-based shelf-space fees, and ASIC discretionary powers. The majority of the Senate Committee recommended that the Bills be passed but made 10 recommendations covering fee disclosure statements, volume-based shelf-space fees and the exemptions for soft-dollar benefits. In a dissenting report, the Coalition Senators said they did not support the FoFA Bills in their current form and made 16 recommendations of their own.
[LTN 51, 15/3]
FoFA “opt-in” exemption proposed for advisers bound by code of conduct
The Government has on Thur 22.3.2012, circulated an amendment to the Corporations Amendment (Future of Financial Advice) Bill 2011 proposing to enable ASIC to exempt financial advisers from the FoFA “opt-in requirement”.
The FoFA Bill currently proposes to require financial advisers to obtain client agreement every 2 years to continue charging ongoing fees (the “opt-in” requirement).
If passed by the House of Reps, the Government’s proposed amendment will allow ASIC to exempt a financial adviser from the opt-in requirement where the person (or class of persons) is bound by a code of conduct approved by ASIC for this purpose. ASIC will be required to be satisfied that the code of conduct obviates the need for persons bound by the code to be bound by the opt-in requirement. Any exemption will be required to be in writing and published by ASIC in the Gazette.
The House of Reps was expected to vote on the FoFA Bills on Thur 22.3.2012.
[LTN 56, 22/3]
FoFA Bills pass House of Reps with amendments; opt-in exemption
The Corporations Amendment (Future of Financial Advice) Bill 2011 and Corporations Amendment (Further Future of Financial Advice Measures) Bill 2011 were passed by the House of Reps on Thur 22.3.2012, with 24 Government amendments. The Bills now move to the Senate.
The Corporations Amendment (Future of Financial Advice) Bill 2011 was amended to enable ASIC to exempt financial advisers from the FoFA “opt-in requirement” (which will require financial advisers to obtain client agreement every 2 years to continue charging ongoing fees). The Minister for Financial Services and Superannuation, Bill Shorten, said the Government has agreed to give ASIC the ability to exempt advisers from the opt-in obligation if they are satisfied that the adviser is signed up to a professional code which obviates the need for opt-in. (Source:Minister for Financial Services and Superannuation media release No 017, 22 March 2012.) The Bill was also amended to include subtle changes to the anti-avoidance provision and when a fee disclosure statement must be given by a financial adviser.
The Corporations Amendment (Further Future of Financial Advice Measures) Bill 2011 was passed by the House of Reps with 6 technical amendments. The Bill now moves to the Senate. The amendments are in relation to the best interests obligations for advisers, a note about scaled advice, the carve-out of execution-only services from conflicted remuneration, and the grandfathering of the transitional provisions for the ban on conflicted remuneration.
Note that the amendments passed by the House of Reps do not cover the Government’s announcement on 15 March 2012 to defer the start date for the mandatory application of the FoFA reforms to 1 July 2013. Presumably, the Government will seek to implement the deferred start date and other changes (such as intra-fund advice and the accountants’ exemption) via amendments to the Bills in the Senate (or via a subsequent FoFA Bill or regulations).
[LTN 57, 23/12]