Treasury has released the third package of amendments to the Corporations Regulations to implement FOFA. The new draft regulations relate to the best interests obligation and the ban on conflicted remuneration as proposed by the Bills. Background
The amendments will:
• allow an agent or employee of an Authorised Deposit-taking Institution (ADI) to take advantage of a reduced best interests duty when the subject matter of the advice sought by the client is about more than one of the following:
– a basic banking product;
– a general insurance product;
– a product that is not a financial product.
• prescribe that a monetary benefit given to a financial services licensee or a representative that relate to a combination of products is not conflicted remuneration if the benefit is given in relation to one or more of the following:
– a general insurance product;
– a life risk insurance product, other than a group life policy for members of a superannuation entity or a life policy for a member of a default superannuation fund; or
– a product that is not a financial product.
• prescribe the circumstances in which a monetary or non-monetary benefit given to an agent or employee of an ADI with respect to a basic banking product and a general insurance product is not conflicted remuneration. This regulation ensures that an agent or employee of an Australian ADI can continue to receive remuneration for the sale of its principal’s or employer’s basic financial products. The regulation also ensures that such a benefit can still be given to an agent or employee of an ADI that is also advising on and receiving a benefit at the same time for products that are not defined as a financial product under Division 3 of Part 7.1 of the Act.
• specify that two or more monetary-benefits can be given to a financial services licensee or a representative for advice that relate to financial products.
• exempt ‘stamping fees’ from the ban on conflicted remuneration – fees paid by a company to a financial services licensee or representative for raising capital or debt on behalf of the company; and
• exempt employee remuneration based on brokerage fees (transaction fees paid by clients to market participants or their authorised representatives for dealing in listed products on their behalf) from the ban on conflicted remuneration.
