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Wednesday, 21 March 2012
Page: 3849


Mr STEPHEN JONES (Throsby) (10:01): As I was saying, there is flexibility as to when and how advisers obtain the renewal notice in relation to their ongoing financial advice. The bill also provides additional grace periods if a client inadvertently opts out by not responding to the renewal notice. The disclosure notice is an important supplement to the renewal requirement and supports fee transparency. It includes fee and service information about the previous and forthcoming 12 months and assists clients to understand whether they are receiving a service from their adviser that is commensurate with the ongoing fee that they are paying. The measure is about the focus being on the client and what is in the client's best interest. Advisers need to ensure that they are in regular contact with their clients if they are charging them regular fees—not unreasonable. Not only is this a fair thing for the client but it is also professional best practice. There has been a lot said about the cost that this measure will impose on financial advisers and, with this, a variety of estimates of the cost. For advisers, on a pure fee-for-service basis—that is, per hour or piece of advice—the renewal measure will impose no cost whatsoever.

Secondly, the bill enhances the capacity of ASIC to supervise the financial services industry and protect investors. Providers of financial services must be licensed by ASIC as part of facilitating investor confidence that those persons are competent and of good fame and character. Licensees also have representatives who act on their behalf. ASIC has powers to protect the public, including applying a variety of administrative remedies against a licensee or its representatives that breach the law.

During the PJC inquiry, ASIC raised concerns about its ability to protect investors by restricting or removing unscrupulous operators from the industry. A number of factors were impacting on the exercise of ASIC's powers, including decisions of the Administrative Appeals Tribunal relating to when someone will breach the law; the difficulty with removing individuals, given the focus on licensees in the Corporations Act; and the lack of scope for ASIC to remove licensees in certain circumstances such as where they are not of good fame and character.

The changes include the PJC's recommendations and will strengthen the gatekeeping function of the licensing regime and extend ASIC's power to remove unsatisfactory persons from the industry. The changes to the licensing and banning thresholds include that ASIC can reduce or cancel a licence or ban a person where that person is likely to contravene—rather than 'will breach'—the law. ASIC may also remove representatives if they are not competent and of good fame and character or if they are involved in the licensee's breach of the law. The changes generally align the thresholds for licensing and banning with similar provisions under the National Consumer Credit Protection Act, which ASIC also administers.

As with the exercise of any administrative powers, an ASIC decision will be based on the individual circumstances of each case but would generally take account of factors such as the nature and seriousness of the misconduct, the internal controls on the licensee or the person and the previous regulatory record of the person.

Existing review rights in relation to ASIC decisions about licensing and banning continue to apply, including to the AAT. These changes should result in ASIC exercising its administrative powers more efficiently and effectively to protect investors.

In summary, the measures in this bill support the key public policy objectives of FoFA to improve consumer trust and confidence in the financial advice they receive, and to improve professional standards.

As I said at the outset, it is not unreasonable, in my view, that if you are going to charge a fee for a service then you get permission for charging that fee. If you have conflicts of interest then you should disclose those conflicts to those people to whom you are providing a service.

Finally, if a person's life savings are at stake then the government and the advisers should tread with great care. On these principles the proposed bill succeeds and I commend the legislation to the House.