The Senate Economics Legislation Committee report on the amended Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 has recommended that the Senate pass the bill.
The amended bill contains new measures proposed by the Palmer United Party (PUP) and the Motoring Enthusiasts Party that require advisers to include new statements and information in statements of advice (SoAs) to ensure clients are aware of their existing rights and their adviser’s obligations under the Corporations Act.
The new statements and information are:
• The provider of the advice is required to provide the advice in accordance with the best interests duty (section 961B);
• The provider of the advice genuinely believes that the advice given is in the best interests of the client, given the client’s relevant circumstances; the term ‘relevant circumstances’ is given meaning by section 961B of the Act;
• The provider of the advice is required in circumstances specified under section 961J to give priority to the client’s interests when giving the advice;
• Information on fees that have been, or may be, charged to the client in relation to the advice;
This includes fees by the providing entity; a related body corporate of the providing entity; a director or employee of the providing entity or a related body corporate; an associate of any of the above; or any other person in relation to whom the regulations require the information to be provided.
• If the client enters into an ongoing fee arrangement with the providing entity to which Division 3 of Part 7.7A applies, that the providing entity must give the client a fee disclosure statement each year in relation to the ongoing fee arrangement;
• If the providing entity recommends that the client acquire a financial product, a statement advising the client that they may have the right to return the product under Division 5 of part 7.9 within a cooling off period; and
• That the client may seek further or varied advice from the providing entity at any time.
The report notes that “some stakeholders” have expressed concerns about the new SoA requirements, and says that while the committee is “generally satisfied” that the amendments meet the government’s aim of reinforcing the obligations of financial advisers and enhancing client awareness of those obligations, the government will have to “carefully monitor the implementation of the new requirements to ensure they operate efficiently and effectively in realising this intent”.
The report, tabled yesterday, says the new measures in the bill put “beyond doubt that it is not the government’s intention to reintroduce commissions”.
“The committee is satisfied that the bill, as it is now drafted, makes it very clear that the general advice exemption from the ban on conflicted remuneration does not permit commission payments,” the report says.
The report contains dissenting views from Labor senators on the committee and from the Australian Greens senator Peter Whish-Wilson.
