Steven Ciobo (Moncrieff, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

I present a supplementary explanatory memorandum to the bill. By leave—I move government amendments (1) to (7), as circulated, together:

(1) Schedule 1, page 3 (before line 4), before item 1, insert:

1A After subsection 946A(2)

  Insert:

  (2A) The Statement of Advice must be signed by the providing entity, or an individual acting on behalf of the providing entity.

  (2B) The client must acknowledge receipt of the Statement of Advice by signing the Statement of Advice as soon as is practicable after it is given to the client.

  (2C) However:

  (a) the client does not commit an offence if the client does not comply with subsection (2B); and

  (b) the providing entity does not fail to give a Statement of Advice in accordance with this Subdivision, merely because receipt of the Statement of Advice by the client is not acknowledged as required under subsection (2B).

  (2D) To avoid doubt, a retail client who is given a Statement of Advice may seek further or varied advice from the providing entity.

Note: This may be necessary if, for example, the client's relevant circumstances (within the meaning of section 961B) change.

  (2E) If the client seeks further or varied advice from the providing entity, the providing entity must ensure that the instructions for that further or varied advice are documented in writing signed by the client (either before or after the advice is given).

  (2F) However:

  (a) the providing entity does not commit an offence if the client does not sign a written copy of the instructions for that further or varied advice; and

  (b) the fact that the client does not sign a written copy of the instructions for that further or varied advice is not evidence that the instructions have not been given.

  (2G) The providing entity, or an individual acting on behalf of the providing entity, must acknowledge receipt of instructions for further or varied advice.

1B After paragraph 947B(2)(c)

  Insert:

  (ca) a statement that the provider of the advice is required under section 961B to act in the best interests of the client in relation to the advice; and

  (cb) a statement that the provider of the advice genuinely believes that the advice given is in the best interests of the client, given the client's relevant circumstances (within the meaning of section 961B); and

  (cc) a statement that the provider of the advice is required in circumstances specified under section 961J to give priority to the client's interests when giving the advice; and

  (cd) information about any fees that have been or may be charged to the client in relation to the advice by any of the following:

     (i) the providing entity;

     (ii) a related body corporate of the providing entity;

     (iii) a director or employee of the providing entity or a related body corporate;

     (iv) an associate of any of the above;

     (v) any other person in relation to whom the regulations require the information to be provided; and

  (ce) if the client enters into an ongoing fee arrangement to which Division 3 of Part 7.7A applies with the providing entity—a statement that the providing entity must give the client a fee disclosure statement each year in relation to the ongoing fee arrangement; and

1C After paragraph 947B(2)(f)

  Insert:

  (fa) if the providing entity recommends that the client acquire a financial product, and Division 5 of Part 7.9 would apply if the client acquired the financial product—a statement that the client may have the right to return the financial product under Division 5 of Part 7.9 within a cooling-off period; and

  (fb) a statement that the client may seek further or varied advice from the providing entity at any time; and

1D Paragraph 947B(2)(h)

  Omit "paragraph (d)", substitute "paragraphs (cd) and (d)".

1E At the end of subsection 947B(2)

  Add:

Note: In most cases, Division 3 of Part 7.7A will apply to an ongoing fee arrangement entered into on or after 1 July 2013. The Division may apply to an ongoing fee arrangement entered into at an earlier time however, if a financial services licensee has elected to have Part 7.7A apply at that earlier time (see section 962D).

1F After paragraph 947C(2)(d)

  Insert:

  (da) a statement that the provider of the advice is required under section 961B to act in the best interests of the client in relation to the advice; and

  (db) a statement that the provider of the advice genuinely believes that the advice given is in the best interests of the client, given the client's relevant circumstances (within the meaning of section 961B); and

  (dc) a statement that the provider of the advice is required in circumstances specified under section 961J to give priority to the client's interests when giving the advice; and

  (dd) information about any fees that have been or may be charged to the client in relation to the adviceby any of the following:

     (i) the providing entity;

     (ii) an employer of the providing entity;

     (iii) the authorising licensee, or any of the authorising licensees;

     (iv) an employee or director of the authorising licensee, or of any of the authorising licensees;

     (v) an associate of any of the above;

     (vi) any other person in relation to whom the regulations require the information to be provided; and

  (de) if the client enters into an ongoing fee arrangement to which Division 3 of Part 7.7A applies with the providing entity—a statement that the providing entity must give the client a fee disclosure statement each year in relation to the ongoing fee arrangement; and

1G After paragraph 947C(2)(g)

  Insert:

  (ga) if the providing entity recommends that the client acquire a financial product, and Division 5 of Part 7.9 would apply if the client acquired the financial product—a statement that the client may have the right to return the financial product under Division 5 of Part 7.9 within a cooling-off period; and

  (gb) a statement that the client may seek further or varied advice from the providing entity at any time; and

1H Paragraph 947C(2)(i)

  Omit "paragraph (e)", substitute "paragraphs (dd) and (e)".

1J At the end of subsection 947C(2)

  Add:

Note: In most cases, Division 3 of Part 7.7A will apply to an ongoing fee arrangement entered into on or after 1 July 2013. The Division may apply to an ongoing fee arrangement entered into at an earlier time however, if a financial services licensee has elected to have Part 7.7A apply at that earlier time (see section 962D).

(2) Schedule 1, page 5 (after line 14), after item 14, insert:

14A Paragraph 961F(b)

  Omit "that is related to a basic deposit product".

(3) Schedule 1, page 6 (after line 14), after item 20, insert:

20A Subsection 962G(1)

  Omit "30 days", substitute "60 days".

20B Subparagraph 962H(1)(b)(i)

  Omit "30 days", substitute "60 days".

(4) Schedule 1, item 29, page 7 (line 24) to page 8 (line 33), omit the item, substitute:

29 At the end of section 963B

  Add:

(4) Despite section 963A, a monetary benefit given to a financial services licensee who provides financial product advice to persons as retail clients is not conflicted remuneration if:

  (a) the benefit is given to the licensee in relation to the issue or sale of a financial product to a person; and

  (b) financial product advice in relation to the product, or a class of products of which the product is one, has not been given to the person as a retail client by the licensee, or a representative of the licensee, in the 12 months immediately before the benefit is given.

(5) Despite section 963A, a monetary benefit given to a representative of a financial services licensee who provides financial product advice to persons as retail clients is not conflicted remuneration if:

  (a) the benefit is given to the representative in relation to the issue or sale of a financial product to a person; and

  (b) financial product advice in relation to the product, or a class of products of which the product is one, has not been given to the person as a retail client by the representative in the 12 months immediately before the benefit is given.

(6) Despite section 963A, a monetary benefit given to a person who gives general advice to a retail client on behalf of a financial services licensee is not conflicted remuneration if:

  (a) the person gives the general advice as:

     (i) an employee of the licensee, or a related body corporate of the licensee; or

     (ii) an employee of an authorised representative of the licensee; or

     (iii) an individual who has been sub-authorised under section 916B by an authorised representative of the licensee to give general advice on behalf of the licensee of the kind given; and

(b) the person gives the general advice under the name of the licensee, a trade mark of the licensee or a business name of the licensee; and

  (c) the benefit is neither:

     (i) a recurring payment made because the person has given the general advice; nor

     (ii) a payment made solely because a financial product of a class in relation to which the general advice was given has been issued or sold to the client;

     (payments commonly referred to as commissions); and

(d) during the 12 months immediately before the benefit was given, the person did not give financial product advice to a retail client, other than:

     (i) general advice; or

     (ii) personal advice in relation to basic banking products, general insurance products, consumer credit insurance or a combination of those products; or

     (iii) a combination of the advice mentioned in subparagraphs (i) and (ii); and

(e) the financial product in relation to which the general advice is given is either:

     (i) a product issued or sold by the licensee or a related body corporate of the licensee; or

     (ii) a product issued or sold by another entity under the name of the licensee, a trade mark of the licensee or a business name of the licensee.

(7) The regulations may, for the purposes of a provision of this section, prescribe either or both of the following:

  (a) circumstances in which all or part of a benefit is taken to satisfy the provision;

  (b) the extent to which, or a method for working out the extent to which, a benefit satisfies the provision.

(8) The regulations may prescribe circumstances in which, despite a provision of this section, all or part of a benefit is to be treated as conflicted remuneration.

(9) In this section:

  business name of a licensee means a business name that is registered to the licensee under the Business Names Registration Act 2011.

  trade mark of a licensee means a trade mark of which the licensee is the registered owner under the Trade Marks Act 1995.

Note: The expression intrafund advice is often used to describe financial product advice given by a trustee (or an employee of, or another person acting under arrangement with, the trustee) of a regulated superannuation fundto its members, where that advice is not of a kind to which the prohibition in section 99F of the Superannuation Industry (Supervision) Act 1993 applies. (Section 99F of that Act prohibits trustees of regulated superannuation funds from passing on the cost of providing certain kinds of financial product advice in relation to one member of the fund to another.)

(5) Schedule 1, item 34, page 9 (lines 11 to 19), omit the item, substitute:

34 At the end of section 963C

  Add:

(2) The regulations may, for the purposes of subsection (1), prescribe either or both of the following:

  (a) circumstances in which all or part of a benefit is taken to satisfy one of the paragraphs in that subsection;

  (b) the extent to which, or a method for working out the extent to which, a benefit satisfies one of the paragraphs in that subsection.

(3) The regulations may prescribe circumstances in which, despite subsection (1), all or part of a benefit is to be treated as conflicted remuneration.

(6) Schedule 1, item 35, page 10 (after line 23), at the end of section 963D, add:

(4) The regulations may prescribe circumstances in which, despite subsection (2), all or part of a benefit is to be treated as conflicted remuneration.

(7) Schedule 1, item 43, page 13 (after line 8), after section 1531A, insert:

1531AA Statements of Advice

(1) The amendments made by items 1A to 1J of Schedule 1 to the Corporations Amendment (Streamlining of Future of Financial Advice) Act 2014, to the extent that they relate to Statements of Advice, apply in relation to Statements of Advice given on or after the later of:

  (a) the commencement day; and

  (b) 1 January 2015.

(2) The amendment made by item 1A of Schedule 1 to the Corporations Amendment (Streamlining of Future of Financial Advice) Act 2014, to the extent that it relates to instructions for further or varied advice, applies in relation to instructions given on or after the later of:

  (a) the commencement day; and

  (b) 1 January 2015.

Today I move amendments to better target the measures in the bill. Following the referral of the bill to the Senate Economics Committee, the government conducted additional consultation on its changes to the Future of Financial Advice provisions. The amendments I move today have been informed by this further round of consultation and the inquiry into the bill undertaken by the Senate Economics Committee.

The amendments to the bill work to further clarify the operation of FoFA and better target the measures proposed by the bill. Further, the bill also amends the statement of advice requirements to implement the additional improvements agreed with the Palmer United Party and the Australian Motoring Enthusiast Party. The first and seventh amendments make a number of changes to the statement of advice requirements to ensure clients are aware of their rights and their adviser's obligations in providing advice in their best interests. The amendments require the statement of advice to be signed by both the adviser and the client, and require any instructions from clients for further or varied advice be signed by the client and acknowledged by the adviser.

The second amendment makes a change to the definition of a 'basic banking product' to ensure products functionally equivalent to those already listed in the definition or products that may not always be related to a basic banking product are included in the definition. The third amendment extends the time period that advisers are required to send a fee disclosure statement to a client in an ongoing fee arrangement from 30 to 60 days after the client's anniversary date. This will ensure the fee disclosure requirements are flexible and adaptable to different practices in the industry.

Amendment (4) makes two key changes. First, it amends the provision that allows benefits to be paid in relation to execution-only services to ensure that the benefit can only be given if financial product advice, as opposed to personal advice, has not been given to the retail client in the previous 12 months by the person receiving the benefit. Second, amendment (4) makes changes to better target the general advice provision and make it clear that commissions are banned under FoFA. The government has supported the ban on commissions and conflicted remuneration for financial advisers since it was first legislated. At no point has the government sought to reintroduce commissions or conflicted remuneration for financial advisers.

Amendments (5) and (6), and amendment (4) in part, put in place regulation-making powers that may prescribe circumstances in which all or part of a benefit is to be treated as conflicted remuneration. That is, if—contrary to our clear expectation and our intention not to bring back conflicted remuneration—developments in the market want our intervention, we could and would address this issue very quickly through regulations. We do not believe that this will be necessary. Amendments (4), (5) and (6) put absolutely beyond doubt how serious the government is about not permitting commissions.

Question agreed to.

Bill, as amended, agree to.