On 29 August the Government released the first tranche of its Future of Financial Advice reforms, for which submissions close 16 September 2011. The proposed reforms cover the best interests duty, a new client priority duty, opt-in requirements and enhancements to ASIC's powers.
The 'opt-in' measure proposes to require advisers to send a renewal notice every two years to new clients, which will apply only to clients who have not previously received any advice from the licensee before 1 July 2012 and who enter into a financial planning arrangement after that date.
The Exposure Draft also proposes to replace the current s 945A requirement for licensees or authorised representatives to have a reasonable basis for advice with new statutory duties to act in the best interests of clients and, where a conflict exists, to give priority to the client's interests over those of the adviser.
ASIC's powers are also targeted with an increase in ASIC's power to refuse to issue or to cancel or suspend a licence where the licensee is likely to contravene its obligations. ASIC will also receive extended banning powers where it has reason to believe that a person is not of good fame and character, not adequately trained or competent to provide a financial service, or is likely to breach or be involved in a breach of a financial services law.
The second tranche of reforms, expected to be released for public consultation shortly, is said to include bans on conflicted remuneration, 'soft-dollar' benefits and asset-based fees and address the definition of intra-fund advice.
The 'opt-in' measure proposes to require advisers to send a renewal notice every two years to new clients, which will apply only to clients who have not previously received any advice from the licensee before 1 July 2012 and who enter into a financial planning arrangement after that date.
The Exposure Draft also proposes to replace the current s 945A requirement for licensees or authorised representatives to have a reasonable basis for advice with new statutory duties to act in the best interests of clients and, where a conflict exists, to give priority to the client's interests over those of the adviser.
ASIC's powers are also targeted with an increase in ASIC's power to refuse to issue or to cancel or suspend a licence where the licensee is likely to contravene its obligations. ASIC will also receive extended banning powers where it has reason to believe that a person is not of good fame and character, not adequately trained or competent to provide a financial service, or is likely to breach or be involved in a breach of a financial services law.
The second tranche of reforms, expected to be released for public consultation shortly, is said to include bans on conflicted remuneration, 'soft-dollar' benefits and asset-based fees and address the definition of intra-fund advice.
For further information see http://www.minterellison.com/Pub/NA/20110901_futureOfFinancialAdvice/
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