The Senate yesterday voted 34-31 against disallowing regulations to the Future of Financial Advice (FoFA) legislation, after an 11th-hour deal struck with the Palmer United Party (PUP) and the Motoring Enthusiasts Party (MEP) that will see the government introduce additional regulations within 90 days.
The Finance Minister, Senator Mathias Cormann, told the Senate that the government had struck a deal with PUP and MEP so that within 90 days it will introduce new regulations to “ensure that the following requirements in the Corporations Act 2001 are explicitly listed in the statement of advice [SoA] provided by financial advisers to their clients and signed off by both”.
The requirements are that:
• The adviser is required to act in the best interests of their client and prioritise their client’s interest ahead of their own consistent with the requirements under subsection 961B and 961J of the Corporations Act 2001;
• Any fees be disclosed and the adviser provide a fee disclosure statement annually if the client enters into or has entered into an ongoing fee arrangement after 1 July 2013. This is already required under our amended financial advice laws;
• That a client has a right to return financial products under a 14-day cooling-off period in accordance with the requirements currently provided under Division 5 of Part 7.9 of the Corporations Act 2001; and
• The client has the right to change his or her instructions to an adviser if, for example, they experience a change in their circumstances.
Cormann said the regulations will “also provide that any instructions to alter or review instructions must be in writing, signed by the client and acknowledged by the adviser”.
Cormann said there will be a requirement in the regulations that in the SoA the adviser provides “an explicit statement that he or she genuinely believes that the advice provided to the client is in the client’s best interests, given the client’s relevant circumstances”.
“There will be a specific requirement enshrined in those regulations that the statement of advice is to be signed by both the adviser and the client,” he said.
“These additional requirements will require regulatory change; the government will make the necessary regulatory changes within 90 days.
“We also will reflect those changes as required in amendments to the actual legislation before the parliament in the Corporations Amendment (Streamlining Future of Financial Advice) Bill 2014.
Finally, the government will work in consultation with all relevant stakeholders to establish an enhanced public register of financial advisers, including employee advisers, which includes a record of each adviser’s credentials and status in the industry. Incidentally, that deals with one of the recommendations out of the Senate Economics Committee inquiry into ASIC, and is also consistent with one of the propositions that has been put forward by the Financial System Inquiry interim report, put forward today.
On this basis the Palmer United Party and Senator Muir from the Motoring Enthusiasts Party will be in a position to support our regulations.”
