{"id":12661,"date":"2011-09-29T10:39:53","date_gmt":"2011-09-29T00:39:53","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=12661"},"modified":"2021-04-15T10:18:49","modified_gmt":"2021-04-15T00:18:49","slug":"fofa-tranche-2","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2011\/09\/29\/fofa-tranche-2\/","title":{"rendered":"Government Releases Latest Round of Draft FoFA Legislation"},"content":{"rendered":"<p>The Federal Government has released the latest round of its Future of Financial Advice (FoFA) draft legislation, which provides further detail around the treatment of conflicted remuneration and other banned remuneration.<\/p>\n<p>This latest exposure draft also provides further detail around soft dollar and volume bonus payments.<\/p>\n<p>A\u00a0summary of the key elements of the exposure draft impacting the life insurance sector includes:<\/p>\n<p><!--more--><\/p>\n<p><strong>Commissions <\/strong><\/p>\n<p>The Bill confirms that from 1\u00a0July 2012 there will be a ban on commissions to licensees and their representatives for the distribution of products.\u00a0 Life risk insurance (other than group life within superannuation, including default funds) is exempt from this ban.<\/p>\n<p>Specifically, the draft legislation states:<\/p>\n<p><em>In the case of a benefit from a life insurance company to a licensee or representative, the benefit will not be conflicted remuneration if it is given in relation to a life risk insurance product other than a group life policy for the benefit of members of a superannuation entity, or a life policy for a member of a default superannuation fund.\u00a0 This ensures that commissions on group risk inside superannuation are prohibited, and commissions are also prohibited on any life insurance policies which are for the benefit of members of a default superannuation fund. \u00a0Commissions will still be permissible on individual life risk (non-investment-linked) policies within superannuation for non-default (&#8216;choice&#8217;) funds. \u00a0Commissions will still be permissible on life risk (non-investment-linked) policies sold outside superannuation.<\/em><\/p>\n<p><strong>Payments to licensees by product issuers<\/strong><\/p>\n<p>Product issuers will not be permitted to give monetary or non-monetary benefits to a dealer group or advisers, whether or not it is considered &#8216;conflicted remuneration&#8217;.<\/p>\n<p>However, this ban does not appear to extend to payments made in relation to life risk insurance, thereby allowing some payments from life insurers to licensees to continue:<em><\/em><\/p>\n<p><em>In the case of a benefit from a life insurance company to a licensee or representative, the benefit will not be conflicted remuneration if it is given in relation to a life risk insurance product other than a group life policy for the benefit of members of a superannuation entity, or a life policy for a member of a default superannuation fund.\u00a0 This mirrors the exclusion outlined in the definition of conflicted remuneration.<\/em><\/p>\n<p><strong>Soft dollar<\/strong><\/p>\n<p>Soft dollar payments, that is non-monetary benefits, over $300 will be banned from a product issuer to a licensee or adviser, even if the payment does not directly conflict advice.<\/p>\n<p>However, as previously indicated, the soft dollar ban will not apply to benefits for education and training (professional development exclusion) or the provision of IT software or support.<\/p>\n<p>The Government has clarified the professional development exclusion by setting the following criteria:<\/p>\n<ul>\n<li><em>Domestic requirement &#8211; the professional development must be conducted in Australia or New Zealand<\/em><\/li>\n<li><em>Majority time requirement &#8211; where 75 per cent of the time (during standard day of 8 hours or equivalent time) is spent on professional development. In a standard 8 hour day, this takes into account a one hour lunch break, as well as another hour that might be applied to other activities such as networking<\/em><\/li>\n<li><em>Expenses &#8211; any travel costs, accommodation and entertainment outside of the professional development activity must be paid for by participants or its employer or licensee<\/em><\/li>\n<\/ul>\n<p><a href=\"http:\/\/futureofadvice.treasury.gov.au\/content\/Content.aspx?doc=consultation\/corporations_further\/default.htm\" target=\"_blank\" rel=\"noopener\">Click here<\/a>\u00a0to view the Exposure Draft of the second tranche of FoFA legislation.<\/p>\n<p>In an early response to its release, the Financial Planning Association (FPA) has welcomed the Government&#8217;s decision not to ban advised\u00a0insurance commissions inside superannuation, saying it had\u00a0convinced the Government\u00a0that this would have created a double standard and further worsened the under-insurance problem.<\/p>\n<p>In a statement issued yesterday, FPA CEO, <strong>Mark Rantall<\/strong>, said:\u00a0 &#8220;In respect to the details released today, the FPA supports the banning of investment commissions and other conflicted remuneration as this will promote trust and confidence in financial advice and provide a better outcome for all consumers.&#8221;<\/p>\n<p>&#8220;We also support the banning on soft dollar benefits which further supports our existing joint venture with the Financial Services Council (FSC) &#8211; setting an industry benchmark on how alternative forms of remuneration paid by third parties are managed and disclosed.&#8221;<\/p>\n<p>riskinfo will provide further updates\u00a0on the key issues stemming from the release of this latest draft FoFA legislation, including clarification of treatment of commissions for group risk outside superannuation, and payments (both monetary and non-monetary) from insurers to advisers.<\/p>\n<p>Industry consultation on the legislation is open until\u00a019 October 2011.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Federal Government has released the latest round of its Future of Financial Advice (FoFA) draft legislation, which provides further detail around the treatment of conflicted remuneration and other banned remuneration. This latest exposure draft also provides further detail around soft dollar and volume bonus payments. A\u00a0summary of the key elements of the exposure draft [&hellip;]<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,270],"tags":[],"class_list":["post-12661","post","type-post","status-publish","format-standard","category-compliance-regulation","category-remuneration"],"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/12661","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=12661"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/12661\/revisions"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=12661"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=12661"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=12661"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}