FOFA amendment regulation registered

The Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014 was registered on 30 June 2014.

The Regulation makes the FOFA changes foreshadowed by the Acting Assistant Treasurer on 20 June (see here).

In particular, the changes include:

  • narrowing the definition of “retail client” to whom the FOFA provisions apply;
  • broadening the definition of “basic banking products” which are exempt from FOFA to include a facility for making non‑cash payments that is not related to a basic deposit product;
  • broadening the circumstances when the grandfathering arrangements for the ban on conflicted remuneration apply;
  • when 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;
  • prescribing that a non-monetary benefit is not conflicted remuneration if the benefit has a genuine education or training purpose and is relevant to the carrying on of a financial services business;
  • prescribing the permitted performance bonuses for individuals which are not conflicted remuneration (“the balanced scorecard”).

Permitted performance bonuses

This amendment expressly permits making payments that would otherwise be considered conflicted remuneration if the part that would otherwise be conflicted is low in proportion to the employee‘s total remuneration and in calculating the part, the weighting attributed to the total value or number of financial products recommended or advised on is outweighed or balanced by the weighting attributed to other matters.

The Explanatory Statement says:

“Whilst “low” is not specifically defined, a benefit is likely to be considered low if it comprises less than 10 per cent of the employee‘s total remuneration. This calculation is to be applied to the period that the benefit relates to (for instance, if the benefit covers a 12 month period, the benefit would need to be compared to the employee‘s total remuneration for that same 12 month period).”

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