FoFA Regulations Remain in Place, For Now

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The Federal Opposition will have to wait until August before it can make another attempt at disallowing the Future of Financial Advice (FoFA) amendment regulations.

Senator Sam Dastyari
Senator Sam Dastyari

Late last week, Labor Senator Sam Dastyari signalled his intention to ask the Senate to vote again on the FoFA regulations, lodging a ‘motion to disallow’ with the Senate. The new motion called for a disallowance of items 1 to 27 inclusive and item 30 of the Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014, effectively maintaining the grandfathering arrangements contained within the regulations but removing all other amendments.

However, Senator Dastyari’s motion was postponed until the next Senate sitting date, owing to the backlog of the Government’s budget Bills. Parliament rose on Friday 18 July, and will not sit again until 26 August.

The Association of Financial Advisers (AFA) issued an urgent rallying call to its members last week, warning advisers about the new disallowance motion and asking them to contact their Senate representatives.

Phil Anderson, AFA COO, told riskinfo the Association had asked its members to communicate with the cross-bench Senators to thank them for the stand that they had taken on the first motion, and to ask them to comment on the renewed motion of disallowance.

“It was the ALP who chose to defer the debate last Thursday and the issue is scheduled to be debated when the Senate returns. We encourage our members to act upon our request and to thank the Senators for their support. We will keep a close eye on this as we approach the next Senate sitting and will communicate again with members closer to that time,” Mr Anderson said.

Meanwhile, the Government is expected to issue amendments to its Corporations Amendment (Streamlining of Future of Financial Advice) Bill, to capture the requirements set out by Clive Palmer as part of his deal with Senator Cormann to secure Palmer United Party votes in the previous FoFA regulation disallowance vote (see: Palmer Deal Secures FoFA Amendments). The debate on the Bill was put on hold in March, so the Senate Economics Legislation Committee could conduct a review of the proposed legislation. The Committee handed down its report in June, recommending that the FoFA amendments Bill should proceed through Parliament, with minimal changes.

The House of Representatives will likely resume its debate of the Bill in the next sitting period, when the Government will introduce the requirements agreed with Mr Palmer, which include:

  • Ensuring the following requirements, as set out in the Corporations Act, are explicitly listed in the Statement of Advice (SoA), which is to be signed-off by both the adviser and the client:
    • That the adviser is required to act in the best interests of their client and prioritise their clients’ interests ahead of their own
    • That any fees be disclosed and that the adviser provide a fee disclosure statement annually if the client enters into an ongoing fee arrangement after 1 July 2013
    • That a client has the right to return financial products under a 14-day cooling-off period
    • That the client has the right to change his or her instructions to their adviser, if, for example, they experience a change in their circumstances
    • That any requests to alter or review instructions must be in writing, signed by the client and acknowledged by the adviser
  • A requirement that the financial adviser provides an explicit statement in the SoA that he or she genuinely believes the advice provided is in the clients’ best interests, given the clients’ relevant circumstances

The Government has also agreed to introduce an enhanced public register of financial advisers, and will shortly establish an industry working group to discuss the details (see: Industry Supports Enhanced Adviser Register).