The Turnbull Government has introduced the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 (Bill) into Parliament as part of reforms to raise the professional, ethical and education standards for financial advisers.
Currently, the Corporations Act 2001 (Cth) imposes a general obligation on Australian financial service licensees to ensure that their representatives are adequately trained and competent to provide financial advice and financial services. The Australian Securities and Investment Commission (ASIC)'s Regulatory Guide 146 sets out ASIC's minimum expectations in terms of the knowledge, skill and education level as guidance.
Key components of the Bill
If passed by Parliament, this Bill as tabled and announced today by the Minister for Revenue and Financial Services, will codify the following key requirements:
- Compulsory education requirements for both new and existing financial advisers. Educational requirement, which requires advisers to complete a bachelor or higher degree, will commence on 1 January 2019, with existing advisers required to reach degree-equivalent status by 1 January 2024;
- Supervision requirements for new advisers;
- A code of ethics for the industry that will take effect from 1 January 2020;
- An exam requirement that will represent a common benchmark across the industry. This exam requirement is to commence on 1 January 2019 with existing advisers having until 1 January 2021 to pass the exam; and
- Ongoing professional development requirements commencing on 1 January 2019.
There will also be sanctions on financial advisers and Australian financial service licensees who fail to comply with the new obligations.
What this means for our clients?
This Bill is undoubtedly very relevant to and may impact many of Baker & McKenzie's clients who are Australian financial service licensees, financial advisers and financial product advisers. If enacted, the new law will see many employees of our clients and potential financial service clients needing to be re-trained.
We recommend that you keep abreast of the developments of this Bill in order to assist you with preparing and planning for the anticipated reforms.
If you would like more information about this Bill and how it may potentially affect you and your staff, or if you would like us to keep you informed of the status of this Bill as it is debated in Parliament, please contact us.