Advisers will no longer need to fulfil unnecessary and burdensome ‘nil reporting’ requirements as part of the incoming Design and Distribution laws after Treasury announced a last-minute amendment based on feedback from the industry.
In a policy statement released Tuesday, Treasury said it was removing the requirement for distributers (ie advisers) to report whether they’ve received a complaint or acquired information requested by the issuer (ie the distributer), “including where there are nil complaints or nil information”.
Advisers and licensees apparently won’t need to report back to distributers if there is no issue with the distributers Target Market Determinations (TMD), but reporting obligations will remain in place when complaints or mismatches with TMDs arise.
“Distributors will still be required to report to issuers, complaints and other requested information that they receive, assisting issuers to assess whether their product governance arrangements are appropriate and their products are meeting the needs of consumers,” the notice stated.
Due to the obligations beginning in less than three weeks (October 5), Treasury will rely on ASIC using its intervention powers to implement the change in lieu of a further legislative amendment.
“To provide certainty on the application of the DDO regime in the period prior to the Government making these amendments, ASIC, following a targeted consultation, will consider making short-term interim changes consistent with the Government’s policy intentions, using its modification and exemption powers under s994L of the Corporations Act,” Treasury stated.
“This will allow the Government time to make these changes permanent and will avoid industry needing to implement product governance arrangements, ahead of commencement, for products that are ultimately not intended to be caught by these reforms.”
The amendment comes just three days after industry stakeholders called the nil reporting requirements “the ultimate box ticking exercise”, and put out a concerted plea for a common sense application of the rules.
“We’ve got 1,100 products with manufacturers taking different approaches to what they want reported,” said Fortnum Financial chief executive Neil Younger. “Some are three months, some are six months. What does it do to de-risk the outcome for the client? It does nothing because nil reporting says nothing.”
The amendment should dramatically reduce the $239 million annual cost of the D&D changes, as per estimates in the regulatory impact statement.
The D&D obligations themselves are just one of six regulatory changes to hit the advice sector in what people are calling “Red October“.
In a sign further concessions may be made, Treasury said on its website consultations will continue “in due course”, with other possible amendments including: “…making clear that more streamlined obligations (i.e. only record keeping and notification obligations) for distributors only apply where the intermediary has a duty to act in the consumer’s best interests, such as where personal advice is provided under the Corporations Act…”
The nil reporting announcement came with a number of other proposed changes linked to the D&D obligations, including clarification around foreign cash settlements, margin lending to corporates and non-cash-payment facilities like credit and debt cards, which are all exempt from the rules.
“Treasury has received feedback from stakeholders as industry works towards implementing the requirements prior to the regime’s commencement,” Treasury stated.
“In light of feedback received from stakeholders, the Government intends to make a number of amendments to achieve its intended operation of these reforms. These amendments are necessary to clarify the law, to ensure a consistent application of the law, and so that the regime remains fit-for-purpose.”