NEED TO KNOW
- Proposed amendments to the Corporations Act to restrict the use of the expressions financial planner and financial adviser.
- Draft regulations extend the scope of the existing stockbroking-related exemptions on the payment of brokerage fees.
- A new regulation clarifies FOFA’s application to the Australian jurisdiction.
Restriction on the use of the terms “financial planner” and “financial adviser”
On 15 May 2013, the Parliamentary Joint Committee on Corporations and Financial Services (PJC) recommended that the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013 (Bill) be passed. The Bill amends the Corporations Act to create an offence for a person to use the expressions “financial planner” and “financial adviser” unless that person holds an Australian financial services license (AFSL) that allows them to provide personal advice in relation to financial products.
The Bill is expected to pass before 30 June 2013 without further amendment. Our update on 25 March 2013 provides more information on this legislative change.
On 7 May 2013, Treasury released draft Corporations Amendment Regulation 2013 (No. N). The regulation extends the brokerage fee exemption to conflicted remuneration and provides that:
- brokerage frees are exempt from the ban on asset-based fees in respect of borrowed amounts; and
- fees can be paid by licensees that execute trades on behalf of the retail clients of other licensees (who do not receive personal advice), where those trades are requested by the client through the non-executing licensee’s online trading service.
A “brokerage fee” is defined under the Corporations Act as a fee paid by a retail client to a provider, who deals on behalf of the client, in financial products traded on prescribed financial markets such as the ASX.
Further clarification and exemptions from FOFA
Corporations Amendment Regulation 2013 (No. 2) was registered on 16 May 2013. The regulation provides that the FOFA reforms only apply in respect of financial services provided to retail clients in Australia.
The regulation also confirms that the best interest obligation will not apply to persons who are exempt from licensing (and in some cases disclosure), under the following ASIC Class Orders:
- CO 05/736 which provides relief to persons providing financial services on low value non-cash payment facilities;
- CO 05/1122 which provides relief to providers of generic financial calculators;
- CO 08/01 which provides relief to group purchasing bodies, bodies who deal in financial products by arranging for cover under risk management products, and
- CO 11/1227 which provides relief for trustees of super entities regarding retirement estimates.
Persons seeking to rely on these exemptions generally, and from the best interest obligation, must ensure they comply with the conditions set out in the Class Orders.
The majority of the FOFA reforms are generally set to commence on 1 July 2013.