The Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014 were disallowed by the Senate on 19 November 2014 after Senators Lambie and Muir joined cross-bench Senators to support a motion by Senator Dastyari (ALP) to disallow the Government’s FoFA amendment regs. The vote to disallow the Regulation was agreed to 32 votes to 30.
ASIC said that it will take a practical and measured approach to administering the law as it now stands following the disallowance of the Regulation. ASIC acknowledged that many Australian financial services (AFS) licensees will now need to make systems changes as a result of the changes to the law governing financial advice. ASIC further recognised that this issue may arise in relation to particular FoFA rules that have now been reinstated following the disallowance of the Regulation, including fee disclosure statements (FDS) and remuneration arrangements.
The Regulation, originally registered on 30 June 2014, had amended the Corporations Regulations 2001 to implement time-sensitive aspects of the Government’s FoFA changes until the measures contained in the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 could be passed by the Senate (having already been passed by the House of Reps with 7 amendments).
The disallowed Regulation had made “interim” changes (applicable from 1 July 2014 until 31 December 2015) to remove the “catch-all” requirement from the best interests duty and facilitate “scaled advice”; remove the requirement for fee disclosure statements (FDS) to be sent to pre-1 July 2013 clients; and remove of the “opt-in” requirement so that investors would not be required to renew their ongoing fee arrangement with their adviser every 2 years. The Regulation had also broadened the FoFA grandfathering arrangements for the ban on conflicted remuneration and specified that benefits relating to general advice would not be conflicted (subject to certain conditions to prevent commission-style payments). Among other things, the Regulation had also sought to clarify that bonuses paid in relation to “permissible revenue” would not be conflicted remuneration and allowed benefits to be paid under a “balanced scorecard arrangement”.
Further details on the FoFA measures are covered in Thomson Reuters Australian Financial Planning Handbook 2014-15.