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2010-2011-2012
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CORPORATIONS AMENDMENT (FUTURE OF FINANCIAL ADVICE) BILL
2011
SUPPLEMENTARY EXPLANATORY MEMORANDUM
Amendments to be moved on behalf of the Government
(Circulated by the authority of the
Minister for Financial Services and Superannuation, the Hon Bill Shorten MP)
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 2
Chapter 1 Explanation of amendments .......................................... 3
Chapter 2 Statement of compatibility with human rights................. 5
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
Bill Corporations Amendment (Future of
Financial Advice) Bill 2011
Corporations Act Corporations Act 2001
FOFA Future of Financial Advice
Licence Australian Financial Services Licence
PJC Parliamentary Joint Committee on
Corporations and Financial Services
1
Explanation of amendments
General outline and financial impact
Outline
On 13 October 2011, the Australian Government introduced the
Corporations Amendment (Future of Financial Advice) Bill 2011 into the
Australian Parliament. Together with the Corporations Amendment
(Further Future of Financial Advice Measures) Bill 2011, the Bill
implements the Government's Future of Financial Advice (`FOFA')
reforms.
These amendments changes to the application of the ongoing fee
arrangement and renewal notice provisions to ensure these measures apply
only to the extent necessary.
Date of effect: The amendments to the Bill commence at the same time as
the remainder of the Bill on 1 July 2012.
Proposal announced: On 26 April 2010, the then Minister for Financial
Services, Superannuation and Corporate Law, the Hon Chris Bowen MP,
announced the FOFA reforms. On 28 April 2011, further detail on the
operation of the FOFA reforms was announced by the Assistant Treasurer
and Minister for Financial Services and Superannuation,
the Hon Bill Shorten MP.
Financial impact: This Bill has no significant financial impact on
Commonwealth expenditure or revenue.
Human rights implications: The amendments to the Corporations
Amendment (Future of Financial Advice) Bill 2011 do not raise any
human rights issue. See Statement of Compatibility with Human Rights --
Chapter 2, paragraphs 2.1 to 2.4.
2
Chapter 1
Explanation of amendments
Outline of chapter
1.1 Schedule 1 to the Corporations Amendment (Future of Financial
Advice) Bill 2011 (the Bill) amends the Corporations Act 2011
(Corporations Act) to require financial advisers (persons who hold a
licence with an authorisation to provide financial product advice or their
representatives) to obtain their retail clients' agreement in order to charge
them ongoing fees for financial advice and to provide their clients with
annual disclosure of fees charged and services provided. [Schedule 1, item 10,
division 3]
1.2 These amendments make minor changes to enable ASIC to
provide relief from the opt-in obligations provided fee recipients are
bound by an ASIC-approved code of conduct.
Charging ongoing fees to clients
1.3 Where an ongoing financial advice relationship exists between
an adviser (the `fee recipient') and a retail client which involves the
charging of an ongoing advice fee (however described), the Bill requires
the fee recipient to discharge two separate (albeit intertwined) obligations.
(i) Disclosure obligation: In order to continue charging an
ongoing fee for a period longer than 12 months, the fee
recipient must provide a fee disclosure statement to the client
outlining fee and service information relevant to the client.
(ii) Renewal notice obligation: In order to continue charging an
ongoing fee for a period longer than 24 months, the fee
recipient must provide both a fee disclosure statement and a
renewal notice to the client.
1.4 The amendments includes a new provision to exempt the
application of 96K (the requirement to send a renewal notice) if ASIC is
satisfied that the person is bound by a code of professional conduct
approved by ASIC for the purposes of the section. [Schedule 1, item 10,
division 3, s962CA]
3
Explanation of amendments
1.5 A code of conduct is approved by ASIC for the purposes of the
section if it is approved under section 1101A, and ASIC is satisfied the
code of conduct obviates the need to be bound by the opt-in requirement.
The exemption must be in writing and ASIC must publish notice of it in
the Gazette. [Schedule 1, item 10, division 3, s962CA]
4
Chapter 2
Statement of compatibility with human
rights
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Corporations Amendment (Future of Financial Advice) Bill 2011
2.1 The amendments to the Corporations Amendment (Future of
Financial Advice) Bill 2011 are compatible with the human rights and
freedoms recognised or declared in the international instruments listed in
section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
2.1 The amendments to the Bill make minor changes to enable
ASIC to provide relief from the opt-in obligations provided fee recipients
are bound by an ASIC-approved code of conduct.
Human rights implications
2.2 The amendments to the Bill do not engage any of the applicable
rights or freedoms.
Conclusion
2.3 The amendments to Bill are compatible with human rights as
they do not raise any human rights issues.
5
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