Federal Register of Legislation - Australian Government

Primary content

A Bill for an Act to amend the law in relation to financial products and financial advice, and for related purposes
Administered by: Treasury
For authoritative information on the progress of bills and on amendments proposed to them, please see the House of Representatives Votes and Proceedings, and the Journals of the Senate as available on the Parliament House website.
Registered 20 Mar 2014
Introduced HR 19 Mar 2014
Table of contents.

2013‑2014

 

The Parliament of the

Commonwealth of Australia

 

HOUSE OF REPRESENTATIVES

 

 

 

 

Presented and read a first time

 

 

 

 

Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014

 

No.      , 2014

 

(Treasury)

 

 

 

A Bill for an Act to amend the law in relation to financial products and financial advice, and for related purposes

  

  


Contents

1............ Short title............................................................................................. 1

2............ Commencement................................................................................... 1

3............ Schedule(s)......................................................................................... 2

Schedule 1—Amendments                                                                                                3

Corporations Act 2001                                                                                               3

 


A Bill for an Act to amend the law in relation to financial products and financial advice, and for related purposes

The Parliament of Australia enacts:

1  Short title

                   This Act may be cited as the Corporations Amendment (Streamlining of Future of Financial Advice) Act 2014.

2  Commencement

             (1)  Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.

 

Commencement information

Column 1

Column 2

Column 3

Provision(s)

Commencement

Date/Details

1.  Sections 1 to 3 and anything in this Act not elsewhere covered by this table

The day this Act receives the Royal Assent.

 

2.  Schedule 1

The day after this Act receives the Royal Assent.

 

Note:          This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act.

             (2)  Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act.

3  Schedule(s)

                   Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Schedule 1Amendments

  

Corporations Act 2001

1  Section 960

Insert:

consumer credit insurance has the same meaning as in the Insurance Contracts Act 1984.

2  Section 960

Insert:

regulated superannuation fund has the same meaning as in the Superannuation Industry (Supervision) Act 1993.

3  Section 960 (definition of renewal notice)

Repeal the definition.

4  Section 960 (definition of renewal notice day)

Repeal the definition.

5  Section 960 (definition of renewal period)

Repeal the definition.

6  Section 960 (definition of volume‑based shelf‑space fee)

Omit “a meaning affected”, substitute “the meaning given”.

7  Paragraph 961B(2)(a)

Repeal the paragraph.

8  After paragraph 961B(2)(b)

Insert:

                   (ba)  identified the objectives, financial situation and needs of the client that are disclosed to the provider by the client;

9  Paragraph 961B(2)(f)

Omit “relevant circumstances;”, substitute “relevant circumstances.”.

10  Paragraph 961B(2)(g)

Repeal the paragraph.

11  Subsection 961B(2) (at the end of the note)

Add “The provider need not inquire into circumstances that would not reasonably be considered as relevant to the subject matter.”.

12  Subsections 961B(3) and (4)

Repeal the subsections, substitute:

Advice given by Australian ADIs—best interests duty satisfied if certain steps are taken

             (3)  If:

                     (a)  the provider is:

                              (i)  an agent or employee of an Australian ADI; or

                             (ii)  otherwise acting by arrangement with an Australian ADI under the name of the Australian ADI; and

                     (b)  the subject matter of the advice sought by the client relates only to the following:

                              (i)  a basic banking product;

                             (ii)  a general insurance product;

                            (iii)  consumer credit insurance;

                            (iv)  a combination of any of those products;

the provider satisfies the duty in subsection (1) in relation to the advice given in relation to the basic banking product and the general insurance product if the provider takes the steps mentioned in paragraphs (2)(b), (ba) and (c).

General insurance products—best interests duty satisfied if certain steps are taken

             (4)  To the extent that the subject matter of the advice sought by the client is a general insurance product, the provider satisfies the duty in subsection (1) if the provider takes the steps mentioned in paragraphs (2)(b), (ba) and (c).

13  After subsection 961B(4)

Insert:

Client seeks scaled advice

          (4A)  To avoid doubt, nothing in this section prevents the provider and a client from agreeing the subject matter of the advice sought by the client.

Example:    A client approaches the provider intending to seek advice on a particular subject matter. As a result of discussion with the provider, the client decides to instead seek advice on a narrower subject matter. The provider and the client then agree the subject matter of the advice sought by the client. The obligations of this Division apply to the advice ultimately sought.

14  Section 961E

Repeal the section.

15  Section 961G

Omit “, had the provider satisfied the duty under section 961B to act in the best interests of the client”, substitute “, having regard to section 961B”.

16  Subsections 961J(2) and (3)

Repeal the subsections, substitute:

             (2)  If:

                     (a)  the provider is:

                              (i)  an agent or employee of an Australian ADI; or

                             (ii)  otherwise acting by arrangement with an Australian ADI under the name of the Australian ADI; and

                     (b)  the subject matter of the advice sought by the client relates only to the following:

                              (i)  a basic banking product;

                             (ii)  a general insurance product;

                            (iii)  consumer credit insurance;

                            (iv)  a combination of any of those products;

subsection (1) does not apply to the extent that the advice relates to a basic banking product or a general insurance product or a combination of those 2 products.

             (3)  Subsection (1) does not apply to the extent that the subject matter of the advice sought by the client is a general insurance product.

17  Section 962CA

Repeal the section.

18  Subdivision B of Division 3 of Part 7.7A (heading)

Repeal the heading, substitute:

Subdivision BDisclosure and termination

19  Subsection 962F(1)

Omit “or section 962K (the renewal notice obligation)”.

20  Subsections 962F(2) and (3)

Omit “or section 962K”.

21  Sections 962K, 962L, 962M and 962N

Repeal the sections.

22  Subdivision C of Division 3 of Part 7.7A

Repeal the Subdivision.

23  At the end of section 963A

Add:

Note:          A reference in this Subdivision (including sections 963A, 963B, 963C and 963D) to giving a benefit includes a reference to causing or authorising it to be given (see section 52).

24  Subsection 963B(1)

Omit “in the circumstances set out in any of the following paragraphs”, substitute “to the extent that one or more of the following paragraphs is satisfied”.

25  Paragraph 963B(1)(a)

Omit “solely”.

26  Paragraph 963B(1)(b)

Omit “solely”.

27  Paragraph 963B(1)(c)

Repeal the paragraph.

28  At the end of subsection 963B(1)

Add:

Example:    If a benefit of $2000 is given and paragraph (1)(a) is satisfied in relation to $500 of that benefit, and paragraph (1)(b) is satisfied in relation to the remaining $1500 of that benefit, none of the benefit would be conflicted remuneration.

Note:          Under the governing rules of some regulated superannuation funds, a member may seek advice on the basis that the trustee of the fund will pay the licensee or representative for the advice and then recover the amount paid from the assets of the fund attributed to that member. In that case, the member has caused or authorised the amount to be paid to the licensee or representative and so, because of section 52 of this Act, paragraph (1)(d) would apply to that amount. This does not affect the trustee’s obligations under section 62 of the Superannuation Industry (Supervision) Act 1993 (which deals with the purposes for which a trustee may act in maintaining a regulated superannuation fund).

29  At the end of section 963B

Add:

             (4)  Despite section 963A, a monetary benefit given to a financial services licensee who provides financial product advice to persons as retail clients is not conflicted remuneration if:

                     (a)  the benefit is given to the licensee in relation to the issue or sale of a financial product to a person; and

                     (b)  personal advice in relation to the product, or a class of products of which the product is one, has not been given to the person as a retail client by the licensee, or a representative of the licensee, in the 12 months immediately before the benefit is given.

             (5)  Despite section 963A, a monetary benefit given to a representative of a financial services licensee who provides financial product advice to persons as retail clients is not conflicted remuneration if:

                     (a)  the benefit is given to the representative in relation to the issue or sale of a financial product to a person; and

                     (b)  personal advice in relation to the product, or a class of products of which the product is one, has not been given to the person as a retail client by the representative in the 12 months immediately before the benefit is given.

             (6)  Despite section 963A, a monetary benefit given to an employee of a financial services licensee is not conflicted remuneration if:

                     (a)  the benefit is given to the employee in relation to general advice given by the employee to a retail client; and

                     (b)  the employee has not given personal advice to the retail client in the 12 months immediately before the benefit is given; and

                     (c)  the financial product in relation to which the general advice is given is a product issued or sold by the licensee.

             (7)  The regulations may, for the purposes of subsection (1), prescribe either or both of the following:

                     (a)  circumstances in which all or part of a benefit is taken to satisfy one of the paragraphs in that subsection;

                     (b)  the extent to which, or a method for working out the extent to which, a benefit satisfies one of the paragraphs in that subsection.

Note:          The expression intrafund advice is often used to describe financial product advice given by a trustee (or an employee of, or another person acting under arrangement with, the trustee) of a regulated superannuation fund to its members, where that advice is not of a kind to which the prohibition in section 99F of the Superannuation Industry (Supervision) Act 1993 applies. (Section 99F of that Act prohibits trustees of regulated superannuation funds from passing on the cost of providing certain kinds of financial product advice in relation to one member of the fund to another.)

30  Section 963C

Omit “Despite section 963A,”, substitute “(1) Despite section 963A,”.

31  Section 963C

Omit “in the circumstances set out in any of the following paragraphs”, substitute “to the extent that one or more of the following paragraphs is satisfied”.

32  Paragraph 963C(a)

Omit “solely”.

33  Subparagraph 963C(c)(ii)

Repeal the subparagraph, substitute:

                             (ii)  the benefit is relevant to the carrying on of a financial services business;

34  At the end of section 963C

Add:

             (2)  The regulations may, for the purposes of subsection (1), prescribe either or both of the following:

                     (a)  circumstances in which all or part of a benefit is taken to satisfy one of the paragraphs in that subsection;

                     (b)  the extent to which, or a method for working out the extent to which, a benefit satisfies one of the paragraphs in that subsection.

35  Section 963D

Repeal the section, substitute:

963D  Benefits for employees etc. of ADIs

             (1)  This section applies if:

                     (a)  a monetary or non‑monetary benefit is given to a financial services licensee, or a representative of a financial services licensee; and

                     (b)  the benefit is in whole or in part remuneration for work carried out, or to be carried out, by the licensee or representative:

                              (i)  as an agent or employee of an Australian ADI; or

                             (ii)  in otherwise acting by arrangement with an Australian ADI under the name of the Australian ADI.

             (2)  If:

                     (a)  access to the benefit, or the amount of the benefit, is in whole or in part dependent on the licensee or representative recommending:

                              (i)  a basic banking product; or

                             (ii)  a general insurance product; or

                            (iii)  consumer credit insurance; and

                     (b)  the licensee or representative does not, in the course of recommending any, or any combination, of those products give other personal advice that does not relate to any of those products;

to the extent that the benefit relates to the recommendation of any, or any combination of, the products mentioned in paragraph (a), the benefit is not conflicted remuneration.

             (3)  The regulations may, for the purposes of subsection (2), prescribe either or both of the following:

                     (a)  circumstances in which all or part of a benefit relates to a recommendation mentioned in the subsection;

                     (b)  the extent to which, or a method for working out the extent to which, a benefit relates to a recommendation mentioned in the subsection.

36  Subsection 964(1)

Repeal the subsection, substitute:

             (1)  This Subdivision applies if:

                     (a)  a financial services licensee or an RSE licensee (the platform operator) is, or offers to be, the provider of a custodial arrangement; and

                     (b)  a funds manager issues or sells a financial product to which the custodial arrangement relates; and

                     (c)  a monetary or non‑monetary benefit is given, or to be given, by the funds manager to the platform operator.

37  Subsection 964(2)

Insert:

funds manager means a financial services licensee or an RSE licensee who issues or sells a financial product to which a custodial arrangement relates.

38  Section 964A

Repeal the section, substitute:

964A  Platform operator must not accept volume‑based shelf‑space fees

             (1)  The platform operator must not accept the benefit if it is a volume‑based shelf‑space fee.

Note:          This subsection is a civil penalty provision (see section 1317E).

             (2)  Subject to subsection (3), the benefit is a volume‑based shelf‑space fee if:

                     (a)  access to the benefit, or the value of the benefit, is wholly or partly dependent on the total value or number of financial products of a particular class, or particular classes, in relation to which the platform operator provides custodial arrangements; and

                     (b)  because of the nature of the benefit or the circumstances in which the benefit is given, it could reasonably be expected to influence the platform operator:

                              (i)  to increase the total number or value of the funds manager’s financial products in relation to which the platform operator is prepared to provide custodial arrangements; or

                             (ii)  to give preferential treatment to the funds manager’s financial products in providing custodial arrangements.

             (3)  If all or part of the benefit is of a kind specified in one of the following paragraphs, then, to the extent that the benefit is of that kind, it is not a volume‑based shelf‑space fee:

                     (a)  a reasonable fee for a service provided to the funds manager by the platform operator or another person;

                     (b)  a discount on an amount payable, or a rebate of an amount paid, to the funds manager by the platform operator, that can reasonably be attributed to economies of scale that are gained, or could reasonably be expected to be gained, because of the number or value of the funds manager’s financial products in relation to which the platform operator provides custodial arrangements;

                     (c)  the benefit is for providing a custodial arrangement in relation to a general insurance product or a life risk insurance product;

                     (d)  the benefit is for providing a custodial arrangement in relation to a basic banking product.

39  Subsection 1317E(1) (table item 22)

Repeal the item.

40  Subparagraph 1317G(1E)(b)(v)

Repeal the subparagraph.

41  Part 10.18 (heading)

Repeal the heading, substitute:

Part 10.18Transitional and application provisions relating to the Future of Financial Advice Measures

42  Before section 1526

Insert:

Division 1Provisions relating to the Corporations Amendment (Further Future of Financial Advice Measures) Act 2012

43  At the end of Part 10.18

Add:

Division 2Provisions relating to the Corporations Amendment (Streamlining of Future of Financial Advice) Act 2014

1531A  Definitions

                   In this Division:

commencement day means the day on which Schedule 1 to the Corporations Amendment (Streamlining of Future of Financial Advice) Act 2014 commences.

1531B  Best interests obligation

                   The amendments made by items 7 to 16 of Schedule 1 to the Corporations Amendment (Streamlining of Future of Financial Advice) Act 2014 apply in relation to the provision of personal advice to a person as a retail client on or after the commencement day.

1531C  Renewal notices (opt‑in requirement)

             (1)  The amendments made by items 17 to 21 and items 39 and 40 of Schedule 1 to the Corporations Amendment (Streamlining of Future of Financial Advice) Act 2014 apply in relation to an ongoing fee arrangement for those renewal notice days for the arrangement that occur on or after the commencement day.

             (2)  In this item:

renewal notice day for an ongoing fee arrangement has the same meaning as it has in Part 7.7A, as in force immediately before the commencement day.

1531D  Disclosure statements for pre‑existing clients

                   The amendment made by item 22 of Schedule 1 to the Corporations Amendment (Streamlining of Future of Financial Advice) Act 2014 applies in relation to an ongoing fee arrangement for those disclosure days for the arrangement that occur on or after the commencement day.

1531E  Conflicted remuneration

                   The amendments made by items 23 to 35 of Schedule 1 to the Corporations Amendment (Streamlining of Future of Financial Advice) Act 2014 apply in relation to a benefit if:

                     (a)  the benefit is one to which Division 4 of Part 7.7A applies under section 1528; and

                     (b)  the benefit is given on or after the commencement day.

1531F  Volume‑based shelf‑space fees

                   The amendments made by items 36 to 38 of Schedule 1 to the Corporations Amendment (Streamlining of Future of Financial Advice) Act 2014 apply to a benefit if:

                     (a)  the benefit is one to which Subdivision A of Division 5 of Part 7.7A applies under section 1529; and

                     (b)  the benefit is given on or after the commencement day.