The Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014 has been disallowed by the Senate.
The disallowance motion passed the Senate 32 votes to 30.
The FOFA changes in the Regulation will now not be implemented unless the Senate passes the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014. This is unlikely if the current opposition to the changes remain.
ASIC has announced a transitional arrangement until 1 July 2015:
ASIC will take a practical and measured approach to administering the law as it now stands following the disallowance of the Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014. We will take into account that – as a result of the change to the law that applies to the provision of financial advice – many Australian financial services (AFS) licensees will now need to make systems changes. ASIC recognises this issue may arise in particular areas, including fee disclosure statements and remuneration arrangements.
We will work with Australian financial services licensees, taking a facilitative approach until 1 July 2015.
ASIC’s latest review of compliance by financial advisers with FOFA (as it was before the changes) is set out in Report 407.
What changes have been reversed?
- the original definition of “retail client” has been restored so that fee disclosure statements need to be given to all clients and advisers are required to obtain consent from their clients every two years for ongoing fee arrangements
- the original best interests duty provisions have been restored
- the added exemptions from the definition of “basic banking products” which are exempt from FOFA have been removed
- the grandfathering arrangements for the ban on conflicted remuneration have been reduced
- the exemption for a monetary benefit given to a person who gives general advice to a retail client on behalf of a financial services licensee from the conflicted remuneration prohibition has been removed
- the exemption for a non-monetary benefit from the conflicted remuneration if the benefit has a genuine education or training purpose and is relevant to the carrying on of a financial services business has been removed
- the permitted performance bonuses for individuals (“the balanced scorecard”) from the conflicted remuneration has been removed.
