ASIC Class Order [CO 03/1063]

Overview

The ASIC Class Order [CO 03/1063], which came into effect under section 911A(2)(l) of the Corporations Act 2001, was enacted to address the need for financial counselling agencies to provide financial services without the requirement of holding an Australian financial services licence under certain conditions. This instrument was prepared by the Australian Securities and Investments Commission (ASIC) and aims to streamline the financial counselling services provided to individuals facing financial difficulties such as debt overcommitment, unemployment, sickness, or family breakdown. The primary policy objective is to facilitate the provision of essential financial advice and counselling services while maintaining a regulatory framework that ensures the integrity and competence of the service providers. The Order specifies conditions under which financial counselling agencies can be exempt from holding a licence, including the nature of the financial services provided, the absence of fees or charges, and the qualifications and associations of the service providers.

Scope and Application

The ASIC Class Order [CO 03/1063] under the Corporations Act 2001 provides an exemption from the requirement to hold an Australian financial services licence for financial counselling agencies. This exemption applies to financial counselling agencies that provide financial product advice or recommend the disposal of financial products to clients as part of a financial counselling service, provided specific conditions are met. The financial counselling service must assist individuals who are in financial difficulty due to circumstances such as debt over-commitment, unemployment, sickness, or family breakdown. To qualify for the exemption, the financial counselling agency must ensure that no fees or charges are payable by or on behalf of the client, no remuneration is payable to the agency by any person in relation to the client's actions, and the agency does not engage in any financial services business outside the scope of the exemption. Additionally, the agency must take reasonable steps to ensure its representatives are members of a financial counselling association and have appropriate training. This class order applies nationally and was last amended on 4 November 2015.

Key Provisions

The ASIC Class Order [CO 03/1063] provides a framework for financial counselling agencies to offer certain financial services without holding an Australian financial services licence. According to section 911A(2)(l) of the Corporations Act 2001, the Australian Securities and Investments Commission (ASIC) grants an exemption to financial counselling agencies from the requirement of a licence when specific conditions are met. These conditions include the provision of financial services that are limited to advice on deposit products, non-cash payment facilities, insurance products, RSA products, superannuation products, and advice on the disposal of securities or government-issued debentures, stocks, or bonds (section 911A(2)(l)(a)). The services must be part of a financial counselling service, and no fees or charges can be made to the client, except those paid by the government (section 911A(2)(l)(c)). Additionally, no remuneration should be received by the financial counselling agency or its representatives (section 911A(2)(l)(d)). The financial counselling agency must also ensure that it does not engage in other financial services businesses and that its representatives are members of a financial counselling association and have appropriate training (section 911A(2)(l)(e) and (f)). The obligations imposed on financial counselling agencies by this class order are comprehensive. Firstly, they must ensure that their services are strictly limited to the types of financial product advice and services outlined in the legislation. They must also maintain strict adherence to the prohibition of fees or charges to clients, except those covered by government payments. Furthermore, they must refrain from receiving any form of remuneration related to the services they provide. The agencies are also required to ensure that their representatives are appropriately qualified and affiliated with a recognised financial counselling association. This includes verifying that all representatives have completed relevant training to provide the services competently (section 911A(2)(l)(f)). These obligations are designed to ensure that financial counselling services are provided in a manner that prioritises the client’s best interests without undue influence from financial gain. Failure to comply with the requirements of this class order can result in significant consequences. While the specific penalties for breach are not detailed within the text provided, breaches of financial services legislation under the Corporations Act 2001 can generally lead to substantial civil or criminal penalties. Civil penalties can include fines up to a significant amount, depending on the severity and frequency of the breach. Criminal penalties may also apply, with potential imprisonment for individuals who are found guilty of serious breaches. The exact penalties are determined by the courts based on the specific circumstances of the breach and the relevant provisions of the Corporations Act. Additionally, ASIC has the authority to take further regulatory action, such as imposing bans on individuals or agencies found to be in breach of the legislation.