Supplementary Explanatory Memorandum
(Circulated by the authority of the Minister for Small Business and Assistant Treasurer, the Hon Kelly O'Dwyer MP)General outline and financial impact
Amendments
On 19 March 2014, the Government introduced the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 (Bill) as part of the Government's Autumn Repeal Day. The purpose of the Bill is to reduce compliance costs imposed on the financial services industry by amending Part 7.7A of the Corporations Act 2001. Part 7.7A is also referred to as Future of Financial Advice (FOFA).
Following refinements to better target a number of FOFA provisions, the Bill passed the House of Representatives on 28 August 2014.
The Government's amendments to FOFA were initially implemented through the Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014 (the Regulation). The Regulation commenced on 1 July 2014. On 19 November 2014, the Senate voted to disallow the Regulation, reversing the law to the original legislation.
Following the disallowance of the Regulation, a number of measures from the Regulation were remade through the Corporations Amendment (Revising Future of Financial Advice) Regulation 2014, which commenced in December 2014. Further measures were remade through the Corporations Amendment (Financial Advice) Regulation 2015, which commenced on 1 July 2015. The Bill is being amended to remove a number of the proposed amendments to FOFA and to implement minor and technical changes.
The minor and technical amendments to the Bill relate to:
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- amending the short title of the Bill;
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- extending the time for fee recipients to provide a renewal notice to a retail client from 30 to 60 days after the client's fee renewal notice day; and
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- extending the time for fee recipients to provide fee disclosure statements to pre-1 July 2013 retail clients from 30 to 60 days.
In summary, the amendments seek to remove the following from the Bill:
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- changes to the Statements of Advice requirements;
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- repeal of the requirement that licensees send fee disclosure statements to pre-1 July 2013 clients;
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- repeal of the opt-in requirement for continuing an ongoing fee arrangement between a fee recipient and a client;
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- changes to the definition of 'volume-based shelf-space';
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- changes to the best interests duty and scaled advice;
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- changes to the execution only provision;
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- changes to allow the payment of mixed benefits; and
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- the general advice exemption from conflicted remuneration.
Extensive consultation has occurred on the FOFA measures as part of the Government's introduction of the Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014 (No.102, 2014), the Corporations Amendment (Revising Future of Financial Advice) Regulation 2014 (No. 208, 2014), and the Corporations Amendment (Financial Advice) Regulation 2015 (No. 108, 2015), in addition to the consultation and parliamentary scrutiny of the Bill.
These parliamentary amendments have also been the subject of targeted consultation with key industry and consumer group stakeholders. Stakeholders including the Association of Financial Advisers, Australian Bankers' Association, Choice, Council of the Ageing, Financial Planning Association of Australia, Financial Services Council, Industry Super Australia, and National Seniors Australia provided written submissions on the parliamentary amendments.
Date of effect: These amendments commence on the day after this Bill receives Royal Assent.
Proposal announced: The Government announced the proposal in a media release dated 25 June 2015.
Financial impact: These amendments have no significant financial impact on Commonwealth expenditure or revenue.
Human rights implications: The amendments to the Bill are compatible with human rights as they do not raise any human rights issues.
Compliance cost impact: A regulation impact statement was not required for these amendments.