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Thursday, 22 March 2012
Page: 4042


Mr SHORTEN (MaribyrnongMinister for Financial Services and Superannuation and Minister for Employment and Workplace Relations) (16:51): by leave—I present a supplementary explanatory memorandum to the bill and I move government amendments (1) to (17) on sheet BG223 and (1) on sheet ZA284 together.

(1) Schedule 1, item 10, page 6 (lines 23 and 24), omit "a period of 12 months or more", substitute "a period of more than 12 months".

(2) Schedule 1, item 10, page 6 (lines 32 and 33), omit "a period of 12 months or more", substitute "a period of more than 12 months".

(3) Schedule 1, item 10, page 9 (line 33), omit "within a period of 30 days", substitute "before the end of a period of 30 days".

(4) Schedule 1, item 10, page 10 (lines 6 to 8), omit subsection 962H(1), substitute:

(1) A fee disclosure statement, in relation to an ongoing fee arrangement, is a statement in writing that:

   (a) includes the information required under this section; and

   (b) relates to:

      (i) a period of 12 months (the previous year) that ends on a day that is no more than 30 days before that on which the statement is given; and

      (ii) any other period prescribed by the regulations.

(5) Schedule 1, item 10, page 10 (lines 13 and 14), omit "the 12 months immediately preceding the disclosure day", substitute "the previous year".

(6) Schedule 1, item 10, page 10 (lines 16 to 20), omit paragraph 962H(2)(b).

(7) Schedule 1, item 10, page 10 (line 21), omit "details of", substitute "information about".

(8) Schedule 1, item 10, page 10 (lines 23 and 24), omit "the 12 months immediately preceding the disclosure day", substitute "the previous year".

(9) Schedule 1, item 10, page 10 (line 25), omit "details of", substitute "information about".

(10) Schedule 1, item 10, page 10 (line 27), omit "the 12 months immediately preceding the disclosure day", substitute "the previous year".

(11) Schedule 1, item 10, page 10 (lines 28 to 30), omit paragraph 962H(2)(e).

(12) Schedule 1, item 10, page 10 (lines 31 to 35), omit paragraphs 962H(2)(f) and (g), substitute:

(f) information about any other prescribed matters, including information that relates to a period that begins after the previous year.

(13) Schedule 1, item 10, page 11 (lines 12 to 16), omit paragraph 962J(b), substitute:

(b) if a fee disclosure statement in relation to the arrangement has been given to the client since the arrangement was entered into—the anniversary of the day immediately after the end of the earliest period of 12 months to which the last fee disclosure statement given to the client related.

(14) Schedule 1, item 10, page 11 (line 19), omit "within a period of 30 days", substitute "before the end of a period of 30 days".

(15) Schedule 1, item 10, page 11 (line 20), omit "send", substitute "give".

(16) Schedule 1, item 10, page 13 (line 28), omit "A person", substitute "(1) Subject to subsection (2), a person".

(17) Schedule 1, item 10, page 14 (after line 11), at the end of section 965, add:

(2) Subsection (1) does not apply to a scheme to the extent that the operation of the subsection would result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) from a person otherwise than on just terms (within the meaning of that paragraph of the Constitution).

(1) Schedule 1, item 10, page 8 (after line 19), at the end of Subdivision A, add:

962CA Exemption from application of opt-in requirement

(1) ASIC may exempt a person, or a class of persons, from section 962K (the opt-in requirement), if ASIC is satisfied that the person is, or persons of that class are, bound by a code of conduct approved by ASIC for the purposes of this section.

(2) A code of conduct is approved by ASIC for the purposes of this section if:

   (a) the code of conduct is approved by ASIC under section 1101A; and

   (b) ASIC is satisfied that the code of conduct obviates the need for persons bound by the code to be bound by the opt-in requirement; and

   (c) ASIC is satisfied of any other matters prescribed by the regulations.

(3) The exemption must be in writing and ASIC must publish notice of it in the Gazette.

Today I move amendments to the Corporations Amendment (Future of Financial Advice) Bill 2011 to ensure that the key Future of Financial Advice reform measures work as intended. The amendments respond to recommendations of the Parliamentary Joint Committee on Corporations and Financial Services inquiry into the bills released on 29 February 2012.

Amendments (1) to (15) respond to a range of concerns by industry about the technical operation of the ongoing fee arrangement disclosure and renewal provisions. Amendments (1) to (5), (8), (10), (13) and (14) make technical changes to time frames around fee disclosure statements to ensure that the provisions can operate more in line with the current reporting periods of financial advice businesses and to make the various disclosure obligations more practical to discharge. Amendment (6) responds to concerns from industry about the practical difficulties of disclosing certain information about fees that have yet to be incurred. As a result, the amendment removes the requirement for a financial adviser to anticipate the amount their client will pay in the forthcoming year. Fee information for the year immediately passed will still be required.

Amendments (7) and (9) respond to concerns from industry that fee disclosure requirements might require more information than is practically necessary when disclosing details of services the client received or was entitled to receive in the previous 12 months. To make it clear that such disclosure need only be sufficient, rather than comprehensive, the amendments replace the words 'details of' with 'information about'. This will not diminish the client's practical understanding of the services they received or are entitled to receive from their adviser. Amendments (11) and (12) respond to the concerns from industry about the practical difficulties of disclosing certain information about services that have yet to be provided to the client. As a result, the amendments remove the requirement of a financial adviser to anticipate the services the client is entitled to receive or will receive in the forthcoming year. Information for the year immediately passed will still be required.

Amendment (15) is a technical change to ensure consistency of terminology in the opt-in provisions by replacing the word 'send' with the word 'give'. This also clarifies that an adviser does not have to send, for example, via mail the opt-in renewal notice to the client but can provide the notice in a number of alternative ways. Amendments (16) and (17) respond to concerns that the anti-avoidance provisions of the bill operate so broadly that they might acquire property on other than just terms. The amendment clarifies that the anti-avoidance provisions do not apply to the extent the operation of the subsection would result in an unjust acquisition of property within the meaning of paragraph 51 (xxxi) of the Constitution.

Returning to the other amendment about opt-in, the government is making some additional changes to the opt-in aspects of the FoFA bill to provide greater flexibility to industry while ensuring consumer protection is maintained. I am indebted in particular to the work of the member for Lyne in terms of the formulation of this amendment. The opt-in obligation requires financial advisers to renew their client's agreement to ongoing fees every two years. While this is an important protection to ensure clients do not pay open-ended ongoing fees while receiving little or no service, some parts of industry have argued this requirement is unnecessary where advisers are members of professional bodies or professional codes which obviate the need for opt-in; for example, if a code requires advisers to provide an ongoing service to clients if they charge an ongoing fee.

The SPEAKER: I ask the minister to pause. The honourable member for Flinders should remove himself from the chamber as he is inappropriately attired. He can come back when he is appropriately attired.

The member for Flinders then left the chamber .

Mr SHORTEN: The amendment gives ASIC the ability to exempt advisers from the opt-in obligation if they are satisfied that the adviser has signed up to a professional code which obviates the need for opt-in. This is a sensible change—which has also been recommended to me by a range of industry participants, along with the member for Lyne—which makes advisers who deliberately put in place set-and-forget arrangements accountable to the opt-in obligations in the law but provides some commonsense relief for those advisers that act in a professional manner and are obligated under a code to adequately service clients. This is not a loophole to opt-in, and let me be clear on this. If ASIC is not satisfied that a professional code obviates the need for opt-in, those advisers signed up to that code will need to comply with opt-in requirements. This also provides an incentive for advisers to attain a greater level of professionalism, something that can only be good for the sector and ultimately the consumers. This ensures consumers are adequately protected either by a professional body or, failing that, the opt-in provisions in the law.