The Senate Committee charged with reviewing the Government’s Future of Financial Advice (FoFA) amendments legislation has again recommended that the Bill be passed.
The Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 was originally referred to the Senate Economics Legislation Committee (SELC) in March 2014, prior to its passage through the lower House (see: Green Light for FoFA Amendments). In its first report, the SELC recommended two changes be made to the Explanatory Memorandum accompanying the Bill:
- That the Government include a paragraph that clearly and unambiguously spells out the best interests obligations and the level of consumer protection they provide, and consider whether any further strengthening is required to ensure that a provider cannot circumvent these obligations
- That the Government make clear it does not intend to reintroduce commissions and that it consider the provisions governing conflicted remuneration and redraft them to ensure that there is greater clarity around their implementation
The Government, led by Acting Assistant Treasurer Senator Mathias Cormann, updated the legislation and accompanying Explanatory Memorandum to reflect the recommended changes, as well as to include additions to Statement of Advice (SoA) provisions, as agreed with the Palmer United and Motoring Enthusiasts parties (see: Palmer Deal Secures FoFA Amendments).
…the proposed amendments achieve an appropriate balance between providing consumer protection and sound professional and affordable financial advice
After passing the House of Representatives last month, the updated Bill was again referred to the SELC for investigation. The SELC has now handed down its second report on the Bill, finding that:
‘…the bill in its current iteration remains fundamentally the same in its intent and effect as the earlier version of the bill. As such, the committee holds that the central finding from the previous inquiry applies equally to the current bill: that is, that the proposed amendments achieve an appropriate balance between providing consumer protection and sound professional and affordable financial advice.’
The SELC report noted that while some stakeholders had expressed concerns about the new SoA requirements the Committee was satisfied that the intent of the measures was sound, adding that the Government will need to ‘carefully monitor the implementation of the new requirements’ to ensure they operate efficiently and effectively.
The Committee also acknowledged Senator Cormann’s efforts to ensure that the exemption of general advice from the conflicted remuneration rules would not lead to the reintroduction of commissions:
‘With regard to the committee’s second recommendation, the Revised Explanatory Memorandum clearly sets out that the general advice exemption from the ban on conflicted remuneration (the general advice provision) does not allow the payment of commissions on general advice, and that it was never the government’s intention that it should do so.
‘Moreover, the bill itself now explicitly establishes that that the general advice provision does not permit payments commonly known as commissions.’
The SELC report recommended that the Senate pass the updated FoFA amendments Bill with no further changes.
However, both the Labor and Greens members of the Committee issued dissenting reports, arguing that the changes did nothing to allay fears that the Government’s Bill would strip back consumer protections.
Labor Senator and SELC Deputy Chair, Sam Dastyari, said: “Labor Senators oppose these amendments to the Corporations Act, rejecting the ever-evolving reasons being presented, rejecting all assertions that they will reduce compliance costs, and rejecting the ongoing attacks on the consumer protections that enhance the professionalism of the financial advice industry.”
Greens Senator Peter Whish-Wilson, who has also been critical of the Government’s FoFA amendments, said the Bill should be put on hold until after the Murray Inquiry had concluded.
The Bill will now be put to a vote in the Senate.
