A Senate disallowance motion for the FOFA regulations has failed.

The regulations which took effect on 1 July 2014 will continue until the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 is passed.

In exchange for support for its FOFA regulations the Acting Assistant Treasurer has announced:

“The Government has agreed to make further improvements to our financial advice laws in regulation and, as required in legislation, to ensure the following requirements in the Corporations Act 2001 are explicitly listed in the Statement of Advice provided by financial advisers to their clients and signed off by both:
•That the adviser is required to act in the best interest of their client and prioritise their client’s interests ahead of their own, consistent with the requirements in subsection 961B and 961J of the Corporations Act 2001;
•That any fees be disclosed and that the adviser will provide a fee disclosure statement annually, if the client enters into, or has entered into, an ongoing fee arrangement after 1 July 2013 (This is already required under our amended financial advice laws);
•That a client has the right to return financial products under a 14-day cooling-off period in accordance with the requirements currently provided under Division 5 of Part 7.9 of the Corporations Act 2001; and
•That the client has the right to change his or her instructions to their adviser, if for example they experience a change in their circumstances.

Any instructions to alter or review instructions must be in writing, signed by the client, and acknowledged by the adviser.

There will be a requirement in those regulations that in that Statement of Advice the financial adviser provides an explicit statement that he or she genuinely believes that the advice provided to the client is in the client’s best interests, given the client’s relevant circumstances.

There will also be a specific requirement enshrined in those regulations that the Statement of Advice is to be signed by both the adviser and the client.

Those changes will be implemented through regulation and, as required, in amendments to the actual legislation currently before the Parliament, the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014.

Finally, the Government will work in consultation with all relevant stakeholders, to establish an enhanced public register of financial advisers (including employee advisers), which includes a record of each adviser’s credentials and status in the industry.”