On 20 March 2013, key pieces of legislation amending financial services law were introduced into Parliament.
NEED TO KNOW
- Amendments to the Corporations Act 2001 restrict the use of the expressions financial planner and financial adviser (including words of similar importance).
- Amendments to the Superannuation Industry (Supervision) Act 1993 (SIS Act) expand the duties of trustees of particular superannuation funds, to merge the superannuation accounts of members of the fund who have multiple accounts within the fund.
RESTRICTION ON USE OF THE EXPRESSIONS FINANCIAL PLANNER AND FINANCIAL ADVISER
The Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013 amends the Corporation Act 2001, to define the terms ‘financial planner’ and ‘financial adviser’ and to restrict the use of those terms, and terms of similar importance.
The legislation complements the Future of Financial Advice reform agenda by purporting to improve trust and confidence in the financial planning sector. It requires that only providers of personal financial product advice on designated financial products and authorised under an Australian financial services license (AFSL), can hold themselves out to be a financial adviser or financial planner.
A designated financial product means a financial product other than:
- a general insurance product (other than a sickness and accident insurance product)
- a consumer credit insurance product
- a basic deposit product
- a non-cash payment product; or
- a FHSA deposit account.
In other words, AFSL holders who provide personal financial product advice in respect of, for example, superannuation, life insurance and managed funds will be caught by the new regime and entitled to refer to themselves as a “financial adviser” or “financial planner”.
Currently, it is an offence under the Corporations Act 2001 for unlicensed providers to use certain restricted words or expression. This reforms proposed under the Bill will expand on the current restrictions so that the restrictions apply to genuine providers of personal financial product advice.
It is proposed that the legislation takes effect from 1 July 2013 or the day after the Act receives Royal Assent. However, it has been indicated that the Bill will be referred to the Parliamentary Joint Committee on Corporations and Financial Services.
Assuming the reforms are introduced, those who are impacted should ensue that their advertising material, business listings or communications with consumers does not make reference to the terms ‘financial planner’, ‘financial adviser’, ‘financial planning adviser’ or ‘financial advising agent’ or anything of the like, if the legislative criteria for doing so is not satisfied.
MERGING MUTIPLE ACCOUNTS IN SUPER
Schedule 5 of the Tax and Superannuation Laws Amendment (2013 Measures No 2) Bill 2013 amends the SIS Act to expand the duties of trustees of superannuation funds (other than the duties of trustees of a pooled superannuation trust or a self managed superannuation fund).
Impacted trustees will be required to establish and implement procedures to consolidate accounts where a member of the fund has multiple accounts within the fund. Specifically, each trustee must:
- establish rules setting out how they will find multiple accounts held by one member within their fund;
- search for multiple accounts at least once each financial year;
- merge the member’s multiple accounts (except in the case of defined benefit and income stream accounts), where it reasonably believes it would be in the best interest of the member (regardless of the balance of the account and if practicable); and
- ensure no fees are payable (other than buy-sell spread fees) for any mergers of multiple accounts.
This is a welcome change, in line with the Stronger Super reform agenda, for those members not actively managing their superannuation. However, the proposed legislation clearly increases responsibility for trustees to manage multiple accounts within their funds.
The Bill proposes to introduce a new standard condition in the Registrable Superannuation Entity’s RSE Licence to ensure that the trustee complies with the new requirements. A trustee that does not establish the required rules will commit a strict liability offence.
It is proposed that the reforms take effect from 1 July 2013 and the first round of consolidation will occur by 30 June 2014.