• New breach reporting obligations include an expanded definition of what constitutes ‘reportable situations’, a new significance test, and significantly shorter timeframes for reporting breaches and likely breaches (30 days) and outcomes of investigations (10 days) to ASIC and affected consumers.
• Licensees will be required to report a suspected breach or likely breach of an adviser of another licensee.
• Under the new test, a breach or likely breach is ‘significant’ if the breach results, or is likely to result, in loss or damage to clients.
• This means the new obligations will require licensees to determine the nature and full extent of an adviser’s misconduct and the degree to which it has impacted clients.
• Any significant breach of a core obligation resulting in loss or damage to a client, where financial advice has been provided to the client must be investigated.
• Licensees must tell affected clients and, following an investigation, remediate any affected clients within 30 days.
• Stronger penalties for failing to comply with the requirements including civil penalties for some provisions.
• New record keeping requirements.
• ASIC guidance sets out the requirements:
  • RG 78 Breach reporting by AFS licensees and credit licensees details the breach reporting obligations, including what constitutes a ‘reportable situation’ and when and how these must be reported to ASIC by the licensee
  • ASIC will permit batch upload reports where it derives from a single root cause to reduce the reporting burden
  • ASIC’s information sheet (INFO 259) outlines the obligations for licensees to investigate certain breaches of the law and to notify and remediate consumers in certain circumstances and within prescribed time frames, and clarifies the meaning of key terminology.
  • ASIC’s summary of changes and FAQ
• Commencement date 1 October 2021
  • Due to the COVID-19 situation in Australia at this time, ASIC “will take a reasonable approach in the early stages of these reforms provided industry participants are using their best efforts to comply”: Read ASIC’s media statement

• Licensees must undertake reference checking and information sharing regarding former, current and prospective employees.
• ASIC guidance sets out the requirements:
  • ASIC Corporations and Credit (Reference Checking and Information Sharing Protocol) Instrument 2021/429 (the Protocol)
  • INFO Sheet 257
  • A checklist for the recruiting licensee (see INFO Sheet 257)
  • A Reference Checking Directory for the recruiting licensee which lists the organisations where certain checks can be made
  • A checklist for the referee licensee
  • An Example template reference request: Reference for a financial adviser, which meets the record keeping requirements
  • A Template Consent Form for the licensee to use to seek the Prospective Representative Consent to the collection, use, disclosure and storage of information to conduct reference checks (see Schedule 1 of the Protocol for the Template Consent Form)
• Commencement date 1 October 2021
  • Due to the COVID-19 situation in Australia at this time, ASIC “will take a reasonable approach in the early stages of these reforms provided industry participants are using their best efforts to comply”: Read ASIC’s media statement

• Planners who have an ongoing fee arrangement with a client must provide an annual Fee Disclosure Statement, an annual renewal notice (opt-in), and annually seek the client’s consent to deduct advice fees.
• Clients must their annual consent and sign the ongoing fee agreement (if you use them) and the fee collection consent authorisation (not the FDS)
• ASIC guidance sets out the requirements:
  • ASIC Corporations (Consent to Deductions – Ongoing Fee Arrangements) Instrument 2021/124) and Explanatory Statement
  • Ongoing fee consents requirements, see Information Sheet 256 FAQs: Ongoing fee arrangements (INFO 256)
  • Example written consent form (ongoing fees) (PDF 137 KB)
  • Electronic agreement by the client to opt-in/renewal notices for OFAs
• The FPA is working with the Financial Services Council (FSC) to develop standardised industry OFA consent forms and guides for use by planners and product providers.
• Commencement date 1 July 2021
  • Regulations on transitional arrangements allow a FDS given to client during the transition period to include a reasonable estimate of the amount of any ongoing fees paid, and services expected to be provided for the 60 day period immediately before the FDS is provided, rather than the exact amount (if it’s not available).
  • If you have any questions – join the conversation on FPA Community.

The Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Bill 2021 is currently before Parliament. Once passed, it will put in place the following reforms.

• The new Single Disciplinary Body (SDB) for financial planners will be establish within ASIC based on the Financial Services and Credit Panel (FSCP). A FSCP may be convened to
  • consider planner misconduct and potential breaches of the FASEA standards
  • apply sanctions where appropriate, which will be posted on the planner’s registration on the FAR
• Registration – an annual registration requirement for financial planners includes a two stage registration process:
  • Stage 1 – licensees will be required to register planners with ASIC with details posted on the Financial Adviser Register (FAR).
  • Stage 2 – (once the FAR has been transitioned to the ATO) each financial planner will individually responsible for registering directly with the ATO.
• Tax Practitioners Board (TPB) – from 1 January 2022 financial planners will no longer be required to be separately registered with the TPB or comply with the TASA Code and TPB’s standards.
  • Financial planners who provide a tax (financial) advice service will need to be registered with the TPB or under the supervision of someone who is registered until at a minimum 1 January 2021 (and potentially a little bit longer depending on when registrations start for the new body).
  • TPB registrations will transfer across to the new disciplinary body, so you won’t need to register again, and the TPB registration fees you’ve paid will also carry across to the SDB.
• FASEA will be wound up:
  • The responsible Minister will set professional standards for financial planners including the Code of Ethics, education, CPD, exam, and professional year requirements, and approve degrees, courses and foreign qualifications
  • Treasury will assist the Minister
  • ASIC will administer the exam.
  • Standards developed by FASEA will remain in place unless the Minister approves amendments after 1 January 2022.

Depending on the passage of the Bill through Parliament to enact these changes, the commencement of the new Single Disciplinary Body, planner registration requirements and changes to TBP and FASEA roles, these reforms are due to commence on 1 January 2022.

• The Government has consulted on establishing a Compensation Scheme of Last Resort (CSLR).
• The FPA and seven other associations have called on the Government to hold off the development of CSLR a for unpaid AFCA determinations. We also completed a submission raising the issues of:
  • It’s not a last resort if the underlying reasons compensation isn’t being paid aren’t fixed by the regulator.
  • It’s not a compensation scheme if it will primarily be used to fund AFCA.
  • Concern with the independence and conflicts of housing the scheme at AFCA.
  • Significant administrative cost for virtually no unpaid claims at present.
  • A lack of equity in the funding model between self licensed and authorised practices of the same size.
• The FPA is preparing an advocacy tool to assist members in raising this issue with your local member of Parliament. Join the conversation on FPA Community.

• All personal financial advice licensees who do not meet the independence requirements in s923A of the Corporations Act must include a ‘non-independent disclosure statement’ in their Financial Services Guide (FSG).
• Licensees and planners are exempt from this requirement if all representatives authorised to provide personal financial advice under the AFSL meet the independence requirements.
• ASIC guidance sets out the requirements:
  • ASIC Corporations (Disclosure of Lack of Independence) Instrument 2021/125) and Explanatory Statement
  • Example lack of independence disclosure statement
  • Section C of Regulatory Guide 175 Licensing: Financial product advisers—Conduct and disclosure (RG 175).
• Commencement 1 July 2021

• Financial advice fees will not be able to be collected from MySuper products from 1 July 2021.
• Financial advice fees from choice products will only be able to be collected where:
  • The client has authorised the payment (as per the annual renewal and product authorisation rules), and
  • Trustees are satisfied that ongoing services are being provided (in the case of ongoing fee arrangements)
• This change applies from 1 July 2021.
• ASIC has released the following information to assist planners and licensees:
  • ASIC Superannuation (Consent to Pass on Costs of Providing Advice) Instrument 2021/126) and Explanatory Statement
  • Example written consent form (non-ongoing fees) (PDF 88 KB)
  • Frequently asked questions – Advice fee consent
• Commencement date 1 July 2021