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Thursday, 22 March 2012
Page: 4057

Mr SHORTEN (Maribyrnong—Minister for Financial Services and Superannuation and Minister for Employment and Workplace Relations) (17:57): by leave—I present a supplementary explanatory memorandum to the bill and move government amendments (1) to (6):

(1) Schedule 1, item 23, page 7 (line 31), after "taken any other step that", insert ", at the time the advice is provided,".

(2) Schedule 1, item 23, page 7 (after line 33), at the end of subsection 961B(2), add:

Note: The matters that must be proved under subsection (2) relate to the subject matter of the advice sought by the client and the circumstances of the client relevant to that subject matter (the client's relevant circumstances). That subject matter and the client's relevant circumstances may be broad or narrow, and so the subsection anticipates that a client may seek scaled advice and that the inquiries made by the provider will be tailored to the advice sought.

(3) Schedule 1, item 24, page 16 (line 25), after "by the licensee or representative", insert "in the 12 months immediately before the benefit is given".

(4) Schedule 1, item 33, page 29 (line 12), omit "subsection (2)", substitute "subsections (2) and (3)".

(5) Schedule 1, item 33, page 29 (lines 19 to 27), omit subsections 1528(2) and (3), substitute:

(2) The regulations may prescribe circumstances in which that Division applies, or does not apply, to a benefit given to a financial services licensee or a representative of a financial services licensee.

(3) Despite subsection (1), that Division does not apply to a benefit given to a financial services licensee, or a representative of a financial services licensee, to the extent that the operation of that Division 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).

(6) Schedule 1, item 33, page 30 (line 7), omit ", 1528(3)".

Amendment (1) responds to concerns raised by industry that in discharging the best interests duty it might not be clear at what point in time the financial adviser would have taken any other step that would have been reasonably regarded as being in the best interests of the client. The amendment clarifies that this requirement applies at the time the financial advice is provided to the client. This was always the intent of the bill but this amendment puts the issue beyond doubt for industry.

Amendment (2) responds to concerns by industry about the capacity of financial advice to be scalable in light of the new best interests duty. The amendment includes a note clarifying that a client may seek scaled advice and that the inquiries to be made by the financial adviser into the client's relevant circumstances will be tailored to the advice sought.

The SPEAKER: Order! Would those male members not wearing jackets please leave the chamber.

Mr SHORTEN: Amendment (3) responds to concerns from industry that the carve-out from the ban on conflicted remuneration for execution-only services does not work as intended. The carve-out is intended to apply where there is no advice provided to the client in relation to a particular sale of a product, but the current bill notes that to use the carve-out no advice should have been provided to the client in relation to the product or class of product. The amendment requires that in order for the carve-out to apply, no advice should have been given to the client in the preceding 12 months—a time frame which is more practical for industry to monitor. Amendments (4) to (6) give proper effect to the grandfathering provisions of the bill in relation to the bans on conflicted remuneration. These ensure that the regulation-making power to prescribe other circumstances in which the conflicted remuneration division applies is effective. The amendments also clarify that the conflicted remuneration division does not apply to the extent that the operation of the division would result in an unjust acquisition of property within the meaning of paragraph 51(xxxi) of the Constitution.