First tranche of draft FOFA legislation released By Paul Cleary | August 2011 Area of Expertise | Insurance & Financial Services
Summary The Government has today released the first tranche of draft legislation of the Future of Financial Advice (FOFA) reforms. The reforms are proposed to commence on 1 July 2012. Interested parties should consider the changes and the impact on their businesses. Written submissions on the draft legislation are due by 16 September 2011.
Who Does This Impact? Wealth Management clients
What Action Should Be Taken? Trustees and financial advisers should consider the changes and whether to make submissions on the draft to Treasury.
The Government has today released the first tranche of draft legislation of the Future of Financial Advice (FOFA) reforms for public consultation. The first tranche of the draft Bill covers a number of key components of the FOFA reforms including: •
the opt-in measure, which requires financial advisers to send a renewal (‘opt-in’) notice every two years to new clients and an annual fee disclosure statement to all clients;
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the best interest duty, which requires financial advisers to act in the best interests of the client and to give priority to the interests of the client in the event of conflict between the interests of the client and the interests of the individual providing the advice, or their employer; and
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the extension of ASIC’s powers to give ASIC the capacity to act at an earlier stage where it has concerns whether an individual or a licensee is a fit and proper person to provide financial services.
The Bill also amends the Corporations Act 2001 requirements to have a reasonable basis for providing advice (section 945A) and to warn clients if the advice is based on incomplete or inaccurate information (section 945B). The amendments will clarify the relationship between the new best interest obligations and these requirements, and impose those requirements on the individual who provides the advice. Date of effect: These reforms are to commence on 1 July 2012. The second tranche of the draft Bill, expected during September 2011, will include the ban on conflicted remuneration, the ban on ‘soft dollar’ benefits, the ban on asset-based fees and the definition of intra-fund advice. The decision on the replacement of the accountants’ exemption is also to be made at that time. We will alert you when the second tranche becomes available. The draft legislation and explanatory memorandum are available at: http://futureofadvice.treasury.gov.au/content/Content.aspx?doc=consultation/corporations_amend/default.htm. Written submissions on the draft legislation are due by 16 September 2011.
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First tranche of draft FOFA legislation released By Paul Cleary
For more information, please contact: Paul Cleary Partner T: 02 8257 5760 paul.cleary@turkslegal.com.au
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