ASIC has released Consultation Paper 189 Future of Financial Advice: Conflicted remuneration (CP 189) which sets out proposals for guidance for financial advisers about complying with the conflicted remuneration provisions which commences on 1 July 2013.
The ban on conflicted remuneration (defined in Section 963A Corporations Act) includes commissions and volume-based payments in relation to the distribution of and advice about retail investment products. Such products include managed investments, superannuation, platforms and margin loans. There is also a ban on asset-based fees for borrowed amounts.
The consultation paper discusses:
- Examples of conflicted remuneration
- Benefits that are not conflicted remuneration
- Benefits of a small value
- Volume-based benefits
- Arrangements where a licensed dealer group is also a platform operator or other product issuer
- Equity arrangements with representatives
- Volume-based benefits that may not be conflicted remuneration
- Performance benefits for employees
- Volume-based shelf-space fees
- Non-volume-based shelf-space fees
- Asset-based fees on borrowed amounts
- Portfolios of products purchased with borrowed and non-borrowed amounts
- Transitional provisions
- Anti-avoidance.
A regulatory guide will be issued in February 2013
The ban on conflicted remuneration operates alongside other FOFA reforms including an obligation for advisers to act in the best interests of clients and a requirement for clients to opt-in to renew ongoing fee agreements.
