House of Representatives

Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016

Explanatory Memorandum

(Circulated by authority of the Minister for Revenue and Financial Services, the Hon Kelly O'Dwyer MP)

Chapter 4 Register of relevant providers

Outline of chapter

4.1 Schedule 1 to the Bill moves the Register Regulations to the Corporations Act. It also makes several amendments to ensure that the Register displays information about relevant providers' compliance with the new standards.

Comparison of key features of the new law and current law

New law Current law
Licensees must notify ASIC when a person becomes a relevant provider. The notice must state:

·
the relevant provider's name and date of birth;
·
the relevant provider's principal place of business;
·
the licensee and its license number;
·
whether the person is a provisional relevant provider, and if so, the day they commenced their professional year;
·
the year the relevant provider started giving personal advice, their product classes and recent advising history (except for provisional relevant providers);
·
for sub-authorisation, the authorised representative's name and number;
·
the relevant provider's education qualifications and membership of professional associations with approved schemes; and
·
the name of the scheme that covers the relevant provider.

Licensees must also notify ASIC if any of this information changes.

Licensees must notify ASIC when a person becomes a relevant provider. The notice must state:

·
the relevant provider's name and date of birth;
·
the licensee and its license number;
·
the year the relevant provider started giving personal advice, their product classes and recent advising history;
·
for sub-authorisation, the authorised representative's name and number; and
·
the relevant provider's education qualifications and membership of professional associations.

Licensees must also notify ASIC if any of this information changes.

ASIC must be notified if a relevant provider fails to comply with the CPD requirements or the Code. No equivalent.
ASIC must maintain the Register and include a range of prescribed information. ASIC must maintain the Register and include a range of prescribed information.

Summary of new law

4.2 The Bill moves the provisions relating to the Register from the Corporations Regulations to the Corporations Act.

4.3 It also amends the provisions that were in the Corporations Regulations so that the Register displays the following additional information:

·
the relevant provider's principal place of business;
·
whether the relevant provider is a provisional relevant provider who is subject to additional supervision requirements;
·
the name of the scheme which monitors and enforces the relevant provider's compliance with the Code;
·
breaches of the Code and the sanctions imposed;
·
whether a relevant provider has failed to comply with the CPD requirement; and
·
only those professional associations which have schemes approved by ASIC.

4.4 Most of the additional information will be included on the Register by 1 January 2020.

Detailed explanation of new law

Restructure of Division 9 (relating to registers)

4.5 Existing Division 9 of Part 7.6 of the Corporations Act contains a number of general provisions concerning registers kept by ASIC that relate to financial services. Division 9 is currently modified by regulations 7.6.06A, 7.6.06B and 7.6.06C and Schedule 8D of the Corporations Regulations. These parts of the Corporations Regulations insert a number of provisions relating to a register of relevant providers kept by ASIC.

4.6 The general provisions in existing Division 9 are moved into new Subdivision A of Division 9. [Schedule 1, Part 1, item 13, before section 922A]

4.7 The provisions relating specifically to the Register of Relevant Providers are moved into new Subdivisions B and C [Schedule 1, Part 1, item 16, sections 922D to 922S]. New Subdivision B contains licensees' obligation to notify ASIC about:

·
a person who becomes a relevant provider; and
·
changes in a matter, that is, changes in the details of persons who already are relevant providers.

[Schedule 1, Part 1, items 1 and 16, sections 910A and 922D to 922P]

4.8 New Subdivision C sets out the information that ASIC must display on the Register [Schedule 1, Part 1, item 16, sections 922Q to 922S]. The cross-reference to ASIC maintaining a Register in the note has also been updated [Schedule 1, Part 1, item 14, note after subsection 922A(2)].

Amendments to the General Provisions Concerning Registers

4.9 Several amendments have been made to the general provisions relating to registers in new Subdivision A.

4.10 Current section 922B allows a person to search registers established under this division and states that the regulations may prescribe fees that the person must pay to ASIC in connection with such searches. This section is simplified and a reference to section 1274A is included which provides more detail about how such searches may be made. [Schedule 1, Part 1, item 15, section 922B]

4.11 A further amendment is made to subsection 1274A(2) which prevents a person searching a hard copy of the register, for example, in order to obtain a person's birth date and place of birth. This amendment protects the privacy rights of persons whose information is on the Register. [Schedule 1, Part 1, item 19, subsection 1274A(2)]

The Register of Relevant Providers

Reporting requirements for new authorisations

4.12 Licensees must notify ASIC of the following when they become a relevant provider or authorise a person who is not a licensee to become a relevant provider:

·
the relevant provider's name, principal place of business and date of birth;
·
the licensee and its license number;
·
the year the relevant provider started giving personal advice, their product classes and recent advising history;
·
relevant ABNs;
·
for sub-authorisation, the authorised representative's name and number;
·
the relevant provider's education qualifications and membership of professional associations; and
·
the name of the scheme that covers the relevant provider.

[Schedule 1, Part 1, item 16, sections 922D to 922G]

4.13 ASIC must also be notified if one of the above details changes or if a body starts or ceases to control a licensee. [Schedule 1, Part 1, item 16, sections 922H, 922J and 922K]

4.14 These requirements are largely the same as in the old law in the Corporations Regulations. The only changes are:

·
ASIC must be notified of the relevant provider's principal place of business [Schedule 1, Part 1, item 16, paragraphs 922E(1)(b) and 922F(1)(b)]. This will make it easier for customers to identify all of the relevant providers within a specific area.
·
ASIC must be notified of the relevant provider's compliance scheme [Schedule 1, Part 1, item 16, paragraphs 922E(1)(i) and 922F(1)(n)]. This will allow consumers to verify that a particular relevant provider has signed up to a scheme and easily check where to make complaints.
·
The notice requirements relating to membership of professional associations have been enhanced so that only professional associations with approved schemes are recorded on the Register. [Schedule 1, Part 1, item 16, subparagraphs 922E(1)(h)(ii) and 922F(1)(m)(ii)]
·
Minor amendments have been made to the sections relating to notifications about a person who starts or ceases to control a body corporate licensee to ensure that the sections draw on the definition of 'control' in section 50AA of the Corporations Act. As the Corporations Act only defines the noun 'control' (not the verb 'control'), the sections have been amended to use 'control' as a noun (rather than as a verb). [Schedule 1, Part 1, item 16, sections 922J and 922K]

4.15 A licensee does not need to notify ASIC of any information that has already been provided to ASIC by another licensee. It is sufficient if the first licensee (A) believes on reasonable grounds that another licensee (B) has notified ASIC. As this information is peculiarly within licensee A's knowledge, licensee A bears an evidential burden of proof. This exemption currently exists in the Corporations Regulations and the new law does not change the party who bears the evidential burden of proof. [Schedule 1, Part 1, item 16, subsections 922F(3) and 922M(2)]

Example 4.1 : Information provided by another licensee Anna is a relevant provider who is authorised to provide advice for both BigBank Licensee and LittleBank Licensee. Anna is listed on the Register.Anna completes a further degree and BigBank Licensee lodges a notice advising ASIC of the change in a matter. BigBank Licensee emails LittleBank Licensee to advise LittleBank Licensee that the required notice has been lodged.LittleBank Licensee is not required to also lodge a notice with ASIC.

4.16 A licensee is not required to provide any information to ASIC about whether a relevant provider has passed the exam. This is because a person cannot be authorised as a relevant provider unless they have passed the exam. It therefore follows that every relevant provider on the Register will have passed the exam.

4.17 The notification requirements are modified in several respects for provisional relevant providers.

·
Licensees must notify ASIC that the person is a provisional relevant provider and the year that the individual commenced the professional year.
·
Licensees are not required to provide the year that supervised advice was first given (because the person is not yet permitted to give unsupervised advice).
·
Licensees may choose not to notify ASIC of the provisional relevant provider's specific product authorisations. This reflects the fact that provisional relevant providers may not be authorised to provide personal advice with respect to specific products, and they may not have decided which financial products they wish to focus on.

[Schedule 1, Part 1, item 16, paragraphs 922F(1)(f) to (h) and subsection 922F(4)]

4.18 Licensees must notify ASIC when a provisional relevant provider completes their professional year and becomes authorised to give advice unsupervised. The notification will need to state the year that the person becomes so authorised and their product classes. Clarification is provided that such amendments constitute a change in a matter that must be notified to ASIC. [Schedule 1, Part 1, item 16, section 922H]

Reporting obligations for the CPD requirement

4.19 The new law inserts additional notification provisions relating to the CPD requirements. Licensees must notify ASIC of the start date of their CPD year. A notice must also be given when licensees change the start date of their CPD year. Licensees may not change the start date of their CPD year more than once every 12 months. [Schedule 1, Part 1, item 16, section 922HA]

4.20 A licensee must lodge a notice with ASIC if a relevant provider fails to complete their CPD during a particular CPD year. The notice must state that the relevant provider has not complied with the requirements in section 921D during that CPD year, and must be provided within 30 business days after the end of the CPD year. [Schedule 1, Part 1, item 16, sections 922HB and 922L]

4.21 The legislation only requires licensees to report failures to comply with respect to time periods during which the relevant provider was authorised by the licensee. Where a relevant provider becomes authorised at some point during the licensee's CPD year, the licensee is not required to report non-compliance with regard to periods before it authorised the relevant provider. Nevertheless, the body has a broad power to determine the requirements which relate to relevant providers whose CPD year changes, and the body's power extends to making a requirement which modifies the operation of the Corporations Act. For further information about this power, please see Chapter 5 of the explanatory memorandum. [Schedule 1, Part 1, item 12, subsections 921U(3) and (4)]

4.22 There is no requirement to lodge a notice with ASIC if the relevant provider has met the CPD requirement.

4.23 The licensee must retain evidence of the CPD undertaken for a year after the relevant CPD year ends. The penalty for failing to retain evidence is 50 penalty units [Schedule 1, Part 1, item 16, section 922HC]. The licensee does not need to provide the evidence to ASIC, unless ASIC uses its existing power to seek it.

Reporting obligations relating to failures to comply with the Code

4.24 If a relevant provider fails to comply with the Code or is sanctioned for failing to comply with the Code, the monitoring body must notify ASIC. The notice must include the name of the relevant provider and the licensee, details of the failure to comply and details of any sanction imposed. [Schedule 1, Part 1, item 16, section 922HD]

4.25 The monitoring body must also notify the licensee of a relevant provider's failure to comply with the Code. [Schedule 1, Part 1, item 12, section 921N]

4.26 Notices must be provided within 30 business days of the monitoring body becoming satisfied that a failure to comply has occurred or imposing the sanction. If a breach and the related sanction are determined within 30 business days of each other, a single notice may be provided within 30 business days of the later of the two events. [Schedule 1, Part 1, item 16, subsections 922HD(1) and (3), and section 922L]

Example 4.2 : Notifications for failures to comply with the Code Margot is a member of the Financial Advisers Professional Association (FAPA) and subscribes to FAPA's scheme.Margot fails to comply with the Code on 7 August. FAPA becomes aware that Margot may have failed to comply with the Code on 11 August. FAPA commences an investigation into Margot's conduct and concludes that Margot has failed to comply with the Code on 13 August.FAPA has 30 business days from 13 August to notify ASIC and Margot's licensee about Margot's failure to comply with the Code. If FAPA imposes a sanction for the failure to comply within the 30 business days, it may submit a combined notice for the breach and the sanction. If a sanction is imposed later than 30 business days after 13 August, FAPA will have to submit a separate sanction notification.

Forms of notices, penalties and miscellaneous provisions

4.27 The requirements concerning the form and when and by whom a notice must be lodged largely replicate the former requirements for notices provided under the Register Regulations. Notices must still be in the prescribed form, lodged within 30 business days of the prescribed event and lodged by the licensee [Schedule 1, Part 1, item 16, sections 922L and 922P]. The only exception is notices relating to failures to comply with the Code which are lodged by the monitoring body [Schedule 1, Part 1, item 16, subsection 922L(6)].

4.28 The penalty for failing to notify ASIC is 50 penalty units [Schedule 1, Part 1, item 16, section 922M]. A licensee may also commit an offence under section 1308 of the Corporations Act and section 137.1 of the Criminal Code if they knowingly give false or misleading information to ASIC.

4.29 Failure to lodge a notice is not deemed to be a continuing offence. In other words, the penalty of 50 penalty units is only applied once and is not applied on each day that the person fails to comply with the lodgement requirement. [Schedule 1, Part 1, item 16, subsection 922M(3)]

4.30 Licensees may ask their relevant providers for information so that the licensee can comply with its notice requirements. The relevant provider is required to provide the information to the licensee within a period that will allow the licensee to comply with its notice obligations. [Schedule 1, Part 1, item 16, section 922N]

New content included on the Register

4.31 Changes are made to the prescribed content of the Register to ensure that it includes information about relevant providers' qualifications, scheme, and any failures to comply with the CPD requirement or the Code. [Schedule 1, Part 1, item 16, subsection 922Q(2)]

4.32 Importantly, the Register must also state whether a relevant provider is a provisional relevant provider and, if so, include a statement that the relevant provider is only allowed to provide advice subject to the supervision requirements set out in Subdivision C of Division 8A of Part 7.6 (see Chapter 2 for details). The Register will also include the date a provisional relevant provider starts the professional year. [Schedule 1, Part 1, item 16, paragraph 922Q(2)(j)]

4.33 ASIC continues to have the power to allocate a unique number to a relevant provider and to correct an error in or omission from the Register. [Schedule 1, Part 1, item 16, sections 922R and 922S]

Application and transitional provisions

Continuation of existing reporting obligations

4.34 The application provisions for the Register ensure the continuation of the Register maintained under the Register Regulations [Schedule 1, Part 1, item 27, subsection 1546T(4) and section 1546V]. Any relevant provider numbers given before commencement under the Register Regulations are also taken to have been given under the new law [Schedule 1, Part 2, item 27, section 1546U]. This ensures that licensees do not need to re-lodge information that is already recorded on the Register and ASIC does not need to reissue relevant provider numbers.

4.35 The notice obligations generally apply to authorisations or changes that occur:

·
after commencement [Schedule 1, Part 2, item 27, paragraphs 1546J(a), 1546P(a), 1546Q(a) and 1546R(a)]; and
·
before commencement, where a notice had not been lodged before commencement. [Schedule 1, Part 2, item 27, paragraphs 1546J(b), 1546P(b), 1546Q(b) and 1546R(b)].

4.36 Similarly, relevant providers' obligation to comply with their licensees' requests for information under new section 922N applies to requests made after commencement and requests made before commencement where the information had not been provided immediately before commencement. [Schedule 1, Part 2, item 27, section 1546S]

4.37 The retrospective operation of the new law with respect to authorisations, changes and requests for information made before commencement does not have an adverse effect on the rights or liabilities of any person. This is because there was already a similar obligation to provide information under the Register Regulations.

New reporting obligations

4.38 The Bill introduces additional reporting obligations to ensure that the Register displays information about whether the relevant provider has satisfied the new requirements. These new reporting obligations have different application dates which are summarised in the table and discussed in more detail in the following paragraphs.

Table 4.1 : Summary of application dates for additional reporting obligations

Date * Reporting Obligation Applies to: Section
1 Jan 2019 Notify ASIC if a relevant provider has not complied with the CPD requirement New and existing advisers 1546E
1 Jan 2019 Notify ASIC of the CPD year start date, and any changes to that date N/A 1546E(1), 1546X
1 Jan 2019 Notify ASIC within 30 business days of becoming aware that the relevant provider has passed the exam Existing advisers 1546Y
1 Jan 2019 Notify ASIC if a person is a provisional relevant provider and, if so, the date that they started their professional year New advisers, and advisers who were banned, disqualified or suspended on 1 January 2019 1546N, 1546Z
15 Nov 2019 Notify ASIC of the scheme that covers the relevant provider New and existing advisers 1546G, 1546W
15 Nov 2019 Notices are only to include professional associations with approved schemes New advisers 1546L, 1546M
1 Jan 2020 Notify ASIC of breaches of the Code (there is also an obligation to notify the licensee) New and existing advisers 1546F
15 Nov 2019 Notify ASIC of the relevant provider's principal place of business New and existing advisers 1546K, 1546W

* ASIC is required to update the Register from roughly the same date as the corresponding obligation on the licensee commences, with the exception of information about whether the adviser has passed the exam. ASIC is not required to include any information on the Register about whether an adviser has passed the exam. [Schedule 1, Part 2, item 27, section 1546T]

CPD

4.39 The licensees' obligation to notify ASIC about the licensee's CPD year and whether any of their relevant providers have failed to comply with the CPD requirement applies from 1 January 2019. The licensee's obligation to retain evidence about compliance with the CPD requirement, and the relevant provider's obligation to provide the licensee with information about CPD completed during the CPD year also apply from 1 January 2019. [Schedule 1, Part 2, item 27, subsections 1546E(2) to (5)]

4.40 With regard to the first year to which the CPD reporting requirement applies, many licensees will have CPD years that do not begin on 1 January 2019. It is intended that their relevant providers should be required to complete an appropriate amount of CPD to cover the period from 1 January 2019 to the start of the licensee's CPD year. The standards body is given the power to set requirements with respect to the amount and nature of CPD that has to be done during this period. [Schedule 1, Part 1, item 12, section 921U]

4.41 The obligation to notify ASIC about the start date of the licensee's CPD year applies from 1 January 2019, as does the obligation to inform ASIC if the licensee changes its CPD year start date. Notification of a licensee's CPD year start date must also be provided with respect to licences granted before 1 January 2019. A licensee who lodges a notice with their CPD year start date under the transitional arrangement must also notify ASIC of any changes to their start date in the usual way. [Schedule 1, Part 2, item 27, subsection 1546E(1) and section 1546X]

Exam

4.42 Licensees need to lodge information about whether existing advisers have passed the exam within 30 business days of becoming aware that the adviser has passed the exam. [Schedule 1, Part 2, item 27, section 1546Y]

4.43 There is no equivalent reporting obligation or application provision for new advisers because they cannot be listed on the Register until they have passed the exam.

Professional year

4.44 For new advisers, licensees must notify ASIC whether a person is a provisional relevant provider and the date they started the professional year from 1 January 2019. This application date is aligned with the start date for both the professional year requirement and the provisions relating to authorising provisional relevant providers in new section 921C. [Schedule 1, Part 2, item 27, section 1546N]

4.45 Most persons who are relevant providers before 1 January 2019 meet the definition of an 'existing provider' and do not need to complete a professional year. Accordingly there is no requirement to lodge a notice about the date that existing providers started their professional year.

4.46 There are a small subset of persons who were relevant providers before 1 January 2019 but who do not fall under the transitional arrangements for existing providers. An existing provider includes a person who was a relevant provider at any time between 1 January 2016 and 1 January 2019 and who is not banned, disqualified or suspended on 1 January 2019 [Schedule 1, Part 2, item 27, section 1546A]. Accordingly, the following relevant providers are not existing providers:

·
persons who were authorised as relevant providers before 1 January 2016 but cease to be relevant providers before 1 January 2016;
·
persons who fail to pass the exam by 1 January 2021 and accordingly cease to be a relevant provider on 1 January 2021 under new subsection 1546B(5);
·
persons who fail to meet the qualification requirements by 1 January 2024 and accordingly cease to be a relevant provider on 1 January 2024 under new subsection 1546B(4); and
·
persons who are banned, disqualified or suspended on 1 January 2019.

4.47 The first three groups of people listed above cease to be relevant providers and need to be re-authorised. Notices for these people must be lodged under new section 922D and from 1 January 2019, these notices need to include information about the date that the person commenced the professional year. [Schedule 1, Part 2, item 27, section 1546N]

4.48 If a person was banned, disqualified or suspended on 1 January 2019, the person remains on the Register as a relevant provider (who is not permitted to give advice) during the period of their banning, disqualification or suspension. Hence, any further notifications about the person would not be lodged under section 922D (which only applies to people who become relevant providers). Instead, there is a separate transitional requirement which applies to these individuals and requires the licensee to notify ASIC of the date that the provisional relevant provider commences the professional year. The licensee must lodge the notice within 30 business days of the person commencing their professional year. [Schedule 1, Part 2, item 27, section 1546Z]

4.49 ASIC is required to update the Register to include the date from which a provisional relevant provider starts undertaking the professional year from 1 January 2019. [Schedule 1, Part 2, item 27, subsection 1546T(2)]

Ethical requirements

4.50 The notice obligations relating to a relevant provider's scheme apply from 15 November 2019, which is 30 business days before 1 January 2020. For earlier notices lodged under section 922D (that is, notices notifying ASIC when a person becomes a relevant provider) which do not contain the name of the scheme, a further notice setting out the information must be lodged with ASIC before 1 January 2020. [Schedule 1, Part 2, item 27, subsection 1546G(1) and section 1546W]

4.51 Monitoring bodies must notify ASIC of any breaches of the Code from 1 January 2020. [Schedule 1, Part 2, item 27, section 1546F]

4.52 ASIC is required to update the Register to include details about a relevant provider's scheme and any non-compliance with the Code from 1 January 2020. [Schedule 1, Part 2, item 27, subsection 1546T(1)]

4.53 The Register will only record professional associations that have a scheme approved by ASIC from 1 January 2020. Prior to this date, the Register will continue to list any professional association that is relevant to the provision of financial advice. The notification obligation in relation to membership of professional associations applies correspondingly so that any notices provided after 15 November 2019 (which is 30 business days before 1 January 2020) will only include professional associations with a scheme approved by ASIC. [Schedule 1, Part 2, item 27, sections 1546L and 1546M and subsection 1546T(3)]

Principal place of business

4.54 The obligation to notify ASIC of the relevant provider's principal place of business applies on or after 15 November 2019, which is 30 business days before 1 January 2020. For earlier notices that do not contain this information, a further notice setting out the information must be lodged before 1 January 2020. [Schedule 1, Part 2, item 27, sections 1546K and 1546W]

4.55 The details about a relevant provider's principal place of business must be entered on the Register from 1 January 2020. [Schedule 1, Part 2, item 27, subsection 1546T(1)]

Penalty for non-compliance

4.56 All notification requirements, including those in the transitional arrangements set out in Part 2 of the Bill, are subject to the penalty provision in section 922M, which imposes a penalty of 50 penalty units for non-compliance. [Schedule 1, Part 1, item 16, section 922M and Schedule 1, Part 2, item 27, section 1546ZA]

Example 4.3 : Reporting obligations relating to new relevant providers Excellent Licensees authorises Anna as a provisional relevant provider on 1 January 2019. Excellent Licensees also authorises Bill as a provisional relevant provider on 1 January 2020.Excellent Licensees must lodge a notice notifying ASIC of Anna's authorisation within 30 business days of authorising her under new section 922D (that is, within 30 business days of 1 January 2019). The notice must include the following information:

·
Anna's name and date and place of birth;
·
Excellent Licensees' name and licence number;
·
the fact that Anna is a provisional relevant provider and the day that she began her professional year;
·
Anna and Excellent Licensee's ABN (if applicable);
·
Anna's product classes (if known, otherwise this information can be provided at a later date);
·
Anna's advising history (if applicable); and
·
Anna's qualifications and membership of professional associations.

The notice does not need to include information about Anna's scheme or her principal place of business because these requirements do not apply until 15 November 2019. Excellent Licensees must lodge a subsequent notice, within 30 business days of 15 November 2019, with Anna's scheme and principal place of business.Excellent Licensees must also lodge a notice within 30 business days of authorising Bill (that is, within 30 business days of 1 January 2020). This notice must include all of the information that was included in Anna's notice as well as information about Bill's scheme and his principal place of business.The monitoring body must notify ASIC of any breaches of the Code by Anna or Bill and the sanctions imposed after 1 January 2020.

Example 4.4 : Reporting obligations relating to existing providers Adam is an existing provider and he works for Excellent Licensees.Assume that Adam and Excellent Licensees are advised that Adam passed the exam on 31 December 2020. Also assume that Adam and Excellent Licensees are advised that Adam has passed his bridging course on 31 December 2023. Adam does not need to complete the professional year as he is an existing provider.Excellent Licensees must comply with the following reporting requirements:

·
notify ASIC that Adam has passed the exam within 30 business days of 31 December 2020;
·
notify ASIC that Adam now holds a higher qualification within 30 business days of 31 December 2023;
·
notify ASIC of Adam's principal place of business within 30 business days of 15 November 2019; and
·
notify ASIC of Adam's scheme within 30 business days of 15 November 2019.

From 1 January 2019, Excellent Licensees must also notify ASIC if Adam does not comply with the CPD requirement within 30 business days of the end of its CPD year.The monitoring body will also be required to notify ASIC of any breaches of the Code and the sanctions imposed after 1 January 2020.


View full documentView full documentBack to top