The Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 was introduced into the House of Reps on Wed 19.3.2014, to give effect to the Government’s proposed FoFA reforms to reduce the regulatory burden on the financial services industry. The key amendments proposed to the Corporations Act 2001 include:
- Best interests duty – removing the “catch-all” provision in s 961B(2)(g) of the Corporations Act from the 7 steps an advice provider may take in order to satisfy the best interests obligation when providing personal advice. Despite the removal of the catch-all, the best interests duty will continue to require an adviser to prove that they have taken the remaining 6 steps and acted in the best interests of their clients.
- Scaled advice – modifying the best interests duty to better facilitate scaled advice (ie personal advice that is limited in scope rather than a holistic financial plan).
- Opt-in requirement – removing the requirement for clients to renew their ongoing fee arrangement with their adviser every 2 years.
- Fee disclosure statements – advisers will only be required to provide an annual FDS to clients who entered into their arrangement after 1 July 2013.
- General advice – providing a targeted exemption from the ban on conflicted remuneration for general advice in certain circumstances (eg benefits given to an employee in relation to general advice).
- Conflicted remuneration – amending the execution-only exemption; education and training exemption; basic banking exemption; ban on volume-based shelf-space fees; client-pays exemption; and mixed benefits.
- Life risk insurance – the Government said it will not progress “at this time” its proposed amendments to expand the range of circumstances under which commissions may be paid on certain life (risk) insurance products. Instead, the Government will undertake a separate process to address concerns raised by the life insurance industry on a broad range of issues.
- Regulation-making powers – introducing a limited power to address future remuneration structures that may be inadvertently captured by the ban on conflicted remuneration.
The Government said it intends to implement the time-sensitive FoFA measures contained in the Bill through the Corporations Regulations to the extent legally possible. These amendments include: the removal of the opt-in requirement; changes to fee disclosure statements; removal of the “catch-all” provision; the facilitation of scaled advice; and changes to conflicted remuneration.
DATE OF EFFECT: The amendments will commence the day after the Bill receives Royal Assent (subject to transitional and application provisions to be set out in Pt 10.18 of the Corporations Act).
[LTN 53, 19/3/14]
FoFA Amendment Bill referred to Senate committee
The Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 has been referred to the Senate Finance and Public Administration Legislation Committee for inquiry and report by 16 June 2014. The Bill contains amendments including:
- removing the “catch-all” provision in s 961B(2)(g) of the Corporations Act from the 7 steps an advice provider may take in order to satisfy the best interests obligation when providing personal advice;
- modifying the best interests duty to better facilitate scaled advice (ie personal advice that is limited in scope rather than a holistic financial plan);
- removing the requirement for clients to renew their ongoing fee arrangement with their adviser every 2 years;
- advisers will only be required to provide an annual FDS to clients who entered into their arrangement after 1 July 2013;
- providing a targeted exemption from the ban on conflicted remuneration for general advice in certain circumstances (eg benefits given to an employee in relation to general advice);
- conflicted remuneration: amending the execution-only exemption; education and training exemption; basic banking exemption; ban on volume-based shelf-space fees; client-pays exemption; and mixed benefits.
[LTN 54, 20/3/14]