ASIC CLASS ORDER [CO 07/447]
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes Class Order [CO 07/447] Temporary extension of time for SOA delivery under s951B(1)(a) of the Corporations Act 2001 (the Act).
Section 951B(1)(a) provides that ASIC may exempt a person or class of persons from all or specified provisions of Pt 7.7 of the Act.
1. Background
The Government’s Tax Laws Amendment (Simplified Superannuation) Act 2007 and related legislation (Simpler Super reforms) introduce some important and far-reaching changes to the superannuation regime with effect from 1 July 2007. Some of these changes have resulted in unusually high demand for financial advice in the period leading up to 1 July 2007. This has placed pressure on providing entities (ie financial advisers) delivering Statements of Advice (SOAs) to clients within the statutory timeframes.
Section 946C of the Act provides that SOAs must be given when, or as soon as practicable after, personal advice is given and in any event before the providing entity (ie the adviser) provides the client with any further financial service that arises out of or is connected with that advice (eg implementing the advice by applying for or acquiring a particular financial product). In time critical cases (where the client expressly instructs the adviser that they want the service immediately or by a specified time), the providing entity is permitted to give the SOA later. However, it must be given within five business days or, if the relevant financial product is subject to a cooling off period under s1019B of the Act, before the cooling off period commences.
2. Purpose of the class order
[CO 07/447] is intended to facilitate the advice-giving process during this unusually busy period by giving providing entities additional time to provide SOAs.
3. Operation of the class order
Paragraphs 4 and 5 of [CO 07/447] exempt providing entities (eg financial advisers) from the obligation to give an SOA within the normal statutory timeframe in the following circumstances:
(a) the advice is about a superannuation product;
(b) the client expressly requests advice immediately or before 1 July 2007 and the advice is actually given before 1 July 2007; and
(c) where the advice relates to a financial product that is subject to a cooling off period – the providing entity gives the client a written statement explaining the nature of the cooling off rights and that the client may not receive the SOA until after the cooling off rights have expired. This written warning should generally be given at the time of the advice, and in any event must be given within 5 days of the advice if the adviser is to rely on [CO 07/447].
[CO 07/447] is subject to the condition (set out in paragraph 6 of [CO 07/447]) that the SOA is given as soon as practicable. However, under paragraph 4 of [CO 07/447], the SOA must be given within 30 days from when the personal advice was provided.
4 Consultation
ASIC consulted with stakeholders (representing the funds management and advice industry) that approached ASIC about this issue on an urgent basis. ASIC did not undertake any specific consultation with other stakeholders before [CO 07/447] was made because of its urgent nature.
Overview
The ASIC Class Order [CO 07/447] was enacted in 2007 to address the challenges arising from the unusually high demand for financial advice in the lead-up to the implementation of the Simpler Super reforms. The reforms, introduced by the Government’s Tax Laws Amendment (Simplified Superannuation) Act 2007, significantly altered the superannuation regime from 1 July 2007, placing considerable pressure on financial advisers to deliver Statements of Advice (SOA) within the statutory timeframes. The Class Order was made by the Australian Securities and Investments Commission (ASIC) under section 951B(1)(a) of the Corporations Act 2001, which allows ASIC to exempt individuals or classes of persons from certain provisions of the Act. The primary objective of [CO 07/447] is to provide temporary relief to financial advisers by extending the time within which they can deliver SOAs, thereby easing the burden during this transitional period.
Scope and Application
ASIC Class Order [CO 07/447] applies to providing entities, specifically financial advisers, who are required to deliver Statements of Advice (SOAs) under the Corporations Act 2001. This class order was introduced in response to the Simpler Super reforms which led to an increased demand for financial advice, causing difficulties for providing entities to meet statutory deadlines. The class order is applicable to situations where the advice pertains to superannuation products, and the client has expressly requested immediate advice before 1 July 2007. Furthermore, it covers instances where the advice relates to a financial product subject to a cooling-off period. The class order is in effect across the Commonwealth of Australia, and its scope is limited to the specified circumstances mentioned above. The exemption granted by the class order allows providing entities additional time to deliver SOAs, with the condition that the SOA must be delivered within 30 days of the personal advice being given. The class order may be extended or restricted through subordinate instruments, although this has not been exercised in this instance.
Key Provisions
The main operative sections of the ASIC Class Order [CO 07/447] focus on providing temporary relief to financial advisers who are experiencing a surge in demand for superannuation advice as a result of the Simpler Super reforms. Under section 951B(1)(a) of the Corporations Act 2001, ASIC has the authority to exempt a person or class of persons from specified provisions of Part 7.7 of the Act. Paragraphs 4 and 5 of [CO 07/447] specifically exempt providing entities from the requirement to deliver a Statement of Advice (SOA) within the usual statutory timeframe, provided certain conditions are met. These conditions include the advice being about a superannuation product, the client requesting immediate advice before 1 July 2007, and the advice being given before the same date. Furthermore, if the financial product is subject to a cooling-off period, the providing entity must give the client a written statement explaining the nature of the cooling-off rights and that the SOA may not be delivered until after the cooling-off period has expired.
The obligations imposed by [CO 07/447] on the providing entities include ensuring that the SOA is given as soon as practicable, with a maximum delay of 30 days from when the personal advice was provided. If the financial product is subject to a cooling-off period, the providing entity must also provide the client with a written statement within five business days of the advice, explaining the nature of the cooling-off rights and that the SOA may not be delivered until after the cooling-off period has expired. This is crucial to ensure that clients are fully informed about their rights and the potential delay in receiving the SOA.
There are no explicit offences, penalties, or civil/criminal consequences outlined for breach of [CO 07/447] in the explanatory statement. However, it is essential for providing entities to adhere to the conditions set out in the class order to avoid potential regulatory action from ASIC. Failure to comply with the obligations and requirements of [CO 07/447] could result in the enforcement of the Corporations Act 2001, which may include fines, penalties, or other regulatory consequences. It is therefore critical for providing entities to understand and comply with the provisions of [CO 07/447] to avoid any potential legal or financial repercussions.