Government issues regulations on grandfathering and repealling SoA obligations

In the lead-up to Christmas we have some good news for the financial advice profession.

Regulation – Resolution of Grandfathering

Today the Government has issued regulations that address the elements of the FoFA Amendments Regulation that they had agreed with the ALP on 26 November 2014 to reinstate. This includes solutions to the key issue for financial advisers of permitting grandfathering to be retained on the transfer of licensee, on the establishment of a new licensee and with the sale or purchase of an advice business. There is also another component that involves a broader definition of eligible education and training for the exemption from the non-monetary conflicted remuneration provisions.

This is certainly a positive for the financial advice profession to get greater certainty on these key matters. Given that the Senate needed to give approval for the Government to issue these regulations, it would seem quite unlikely that these regulations would subsequently be disallowed.

Regulation – Removal of Obligations under the Palmer United Party Deal

The Government has also issued a regulation that repeals the obligations that were put in place with respect to SoA disclosures as a result of the Palmer United Party deal. Due to the disallowance of the FoFA Amendments Regulations, the Government has removed the obligations that were created as part of their deal with the Palmer United Party, which included:

– An obligation to get the client to sign the SoA.

– A requirement where the client wants to change their instructions, to get it in writing and have the adviser acknowledge the change.

– Include statements in SoAs about the obligation to act in the best interests of the client and to prioritise the interests of the client.

– Include a statement about the advisers obligation to provide Fee Disclosure Statements.

Since these obligations were due to commence from 1 January 2015, and were still subject to uncertainty about issues like getting clients to sign SoAs (even when they had chosen not to proceed with the advice), this is an important development for the financial adviser community.

We welcome these two developments that help to provide the financial advice profession with key improvements and increased certainty.