FOFA changes introduced

The Commonwealth Government has introduced the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 into the House of Representatives.

UPDATE 24 March 2014: The Bill has been referred to the Senate Economics Legislation Committee; Report due 16/06/2014.

Changes delayed

The Bill includes the following amendments to FOFA:

  • removing the need for clients to renew their ongoing fee arrangement with their adviser every two years;
  • making the requirement for advisers to provide a fee disclosure statement only applicable to clients who entered into their arrangement after 1 July 2013;
  • removing section 961B(2)(g), the ‘catch-all’ provision, from the the best interests obligation;
  • better facilitating the provision of scaled advice; and
  • providing a targeted exemption for general advice from the ban on conflicted remuneration in certain circumstances.

Time sensitive amendments will be made to the Corporations Regulations to the extent allowed under the relevant regulation-making powers. These amendments will subsequently be repealed once this Bill receives the Royal Assent.

ASIC has indicated that it will not take enforcement action in relation to the specific FOFA provisions that the Government is planning to repeal through this Bill and the associated regulations. For example, ASIC will not take action for breaches of the section which requires fee disclosure statements to be provided to retail clients with ongoing fee arrangements entered into before 1 July 2013.

These proposed changes have been the subject of criticism that they represent a weakening of consumer protection.

It is not clear what attitude the Senate will have to the Bill or the effect of Senator Sinodinos standing down as Assistant Treasurer.

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