What is the current status of grandfathered benefits when a financial advice business is sold or a financial adviser changes employer?
As the Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014 was disallowed on 19 November 2014 the amendments made by that regulation no longer apply.
Amongst other things, the Regulation inserted a new regulation 7.7A.16BA to clarify that when a financial advice business is sold, if the grandfathering provisions applied to any benefits transferred to the purchaser as part of the sale, the purchaser could then receive the ongoing benefit. This meant that the buyer of a business would have the same protection for benefits that the seller of the business had.
The Regulation was made to clarify the provisions in section 1528(3) of the Corporations Act.
Without regulation 7.7A.16BA buyers and sellers are back to interpreting section 1528(3) which refers to paragraph 51(xxxi) of the Constitution.
The “redirected benefit” provisions in the Regulations were also disallowed.
The objective of these changes was to allow an authorised representative who moved licensee with their client book to continue to receive benefits that would have been grandfathered had the authorised representative not moved licensee. The changes would have also allowed an authorised representative to move licensees more than once and still receive redirected benefits.
It will be interesting to see whether these provisions are revived.
