FoFA Grandfathering Regulation Made Law

The regulation to improve the Future of Financial Advice grandfathering arrangements has been made law.

The Corporations Amendment (Revising Future of Financial Advice) Regulation 2014 was registered on Monday 15 December, taking effect from 16 December. The changes contained within the regulation have the support of both the Government and Opposition (see: Grandfathering Agreement Reached).

The Regulation makes the following changes:

• Amends the grandfathering arrangements for the ban on conflicted remuneration to:
  • Allow advisers to change the financial services licensee under which they are authorised whilst retaining their rights to receive grandfathered conflicted remuneration (that is, remuneration that is not subject to the ban and is permitted to be paid despite otherwise being conflicted remuneration)
  • Extend the dates at which grandfathering ceases for benefits paid under employee arrangements
  • Other minor amendments to clarify the intended operation of the grandfathering provisions
• Specifies additional benefits that are permitted under the ban on conflicted remuneration and clarifies the operation of existing provisions, including:
  • Broadening the circumstances when benefits may be paid in relation to the stockbroker-related activities and clarifying the operation of existing provisions where uncertainty currently exists
  • Broadening the existing education and training provisions to provide that benefits in relation to education and training that relate to conducting a financial services business are not conflicted remuneration
• Ensures that the existing provisions which extend the renewal period for accountants’ certificates from six months to two years that currently apply other parts of the Act also apply in respect of the FoFA provisions.

In the explanatory statement accompanying the regulation, the Government said it had not issued the regulation for industry consultation because it replicated the measures contained within the previous regulation, which was disallowed last month (see: Senate Takes Axe to FoFA Amendments). A draft of the previous regulation was published on the Government’s FoFA website on 29 January 2015, and the consultation period remained open for three weeks.

In other FoFA news, the changes due to be made to the Statement of Advice (SoA) requirements, agreed with the Palmer United Party in July 2014, have been repealed.

On 15 July 2014, Senator Mathias Cormann announced the Government would implement changes to the SoA requirements in exchange for the support of the Palmer United Party and the Australian Motoring Enthusiast Party for its FoFA amendments. The SoA changes were contained within a regulation (Corporations Amendment (Statements of Advice) Regulation 2014), due to take effect on 1 January 2015.

The Government said it has decided to repeal the Statements of Advice Regulation as the agreement with the Palmer United Party and the Australian Motoring Enthusiast Party is no longer in force.

The Repeal Regulation removes the additional disclosure requirements introduced by the Statements of Advice Regulation. The Repeal Regulation also repeals requirements that the adviser and the client sign the SoA, as well as sign instructions for further or varied advice.

These latest changes to the FoFA regime have been welcomed by both the Association of Financial Advisers (AFA) and Financial Planning Association (FPA).

In a communication to members, AFA CEO, Brad Fox, said the Association welcomed these two developments, saying they would help to provide the financial advice profession with key improvements and increased certainty.

FPA CEO, Mark Rantall, said the uncertainty around grandfathering was one of the biggest issues resulting from the disallowance of the FoFA regulations.

“Today’s finalisation of the grandfathering provision will enable all advisers to retain grandfathered benefits, regardless of the licensee they move to, fostering greater fairness across the financial planning profession,” Mr Rantall said.

“The repeal of the SoA changes is another good outcome for the profession today. We always believed that the changes put forward were already a requirement, and therefore a duplication. To this end, the appropriate consumer protections remain in place.”