The Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020 addresses four recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (FSRC) relating to financial advice.
Treasurer Josh Frydenberg said the reforms will strengthen and simplify the ongoing fee arrangement framework in the Corporations Act 2001 to minimise the risk that these types of arrangements give rise to fee for no service conduct.
They will also amend disclosure requirements to ensure that financial advisers disclose whether they are independent and ensure that only fees for one-off financial advice can be deducted out of MySuper accounts.
Schedule 1 of the bill amends the Corporations Act to require financial services providers that receive fees under an ongoing fee arrangement to provide clients with a single document each year which outlines the fees that will be charged and the services which the client will be entitled to in the following 12 months and which seeks annual renewal from clients for all ongoing fee arrangements.
It will also require financial services providers to obtain written consent before fees under an ongoing fee arrangement can be deducted from a client’s account.
Schedule 3 of the bill amends the SIS Act to provide greater protection for superannuation members against paying fees for no service.
“The amendments increase the visibility of advice fees for all superannuation products and prohibit the charging of ongoing advice fees from MySuper products,” the explanatory memorandum states.
Mr Frydenberg said the government will also be expanding the operation of the Financial Services and Credit Panel (FSCP) within the Australian Securities and Investments Commission (ASIC).
“The FSCP currently supports ASIC in the exercise of its regulatory functions with respect to the making of banning orders against individuals for misconduct,” he said.
“Expanding the role of the FSCP will leverage its extensive expertise and existing governance structures, avoiding the need to establish a new body to perform this role.”
Consolidating this new function within ASIC, he said, will also avoid regulatory overlap and minimise the possibility of multiple investigations by multiple agencies into the same conduct related to the provision of financial advice.
He also stated that the government will move the standard-making functions of the Financial Adviser Standards and Ethics Authority (FASEA) to the Treasury, with the standards to be set by legislative instrument.
“Remaining elements of FASEA’s role, including administering the adviser examination, will be incorporated into the FSCP’s expanded mandate,” he said.
“These reforms will further streamline the number of bodies involved in the oversight of financial advisers, resulting in FASEA being wound up.”
