EXPLANATORY STATEMENT for
ASIC Corporations (Urgent Superannuation Advice) Instrument 2017/530
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes ASIC Corporations (Urgent Superannuation Advice) Instrument 2017/530 under section 951B(1)(a). 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 Corporations Act 2001(the Act).
- Background
The Government's Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 and related legislation introduce some important changes to the superannuation system with effect from 1 July 2017. Some of these changes have resulted in unusually high demand for financial advice in the period leading up to 1 July 2017. This has placed pressure on providing entities (i.e. 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 (i.e. the adviser) provides the client with any further financial service that arises out of or is connected with that advice (e.g. 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 instrument
ASIC Corporations (Urgent Superannuation Advice) Instrument 2017/530 (the Instrument) is intended to facilitate the advice-giving process during this unusually busy period by giving entities additional time to provide SOAs.
3. Operation of the instrument
Paragraph 5 of the Instrument exempts providing entities from the obligation to give an SOA within the normal statutory timeframe and allows an SOA to be given within 30 days after providing advice to the client, in the following circumstances:
a) the advice is about a superannuation products in connection with the changes in laws regulating superannuation as a result of the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016;
b) the client expressly requests the advice be provided before 1 July 2017 and the advice is given before 1 July 2017; 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 rights have expired. This written warning should be given at the time the advice is provided.
The exemption is subject to the condition (set out in paragraph 6 of the Instrument) that the SOA is given as soon as practicable after the advice is provided.
4. Consultation
ASIC received an urgent application for relief from CPA Australia Limited (CPA) which was supported by Chartered Accountants Australia and New Zealand (ICAANZ) and the Financial Planning Association of Australia Limited (FPA).
Overview
The ASIC Corporations (Urgent Superannuation Advice) Instrument 2017/530, enacted under section 951B(1)(a) of the Corporations Act 2001, was introduced by the Australian Securities and Investments Commission (ASIC) to address the significant pressure faced by financial advisers due to the unusually high demand for financial advice in the lead-up to the implementation of the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 on 1 July 2017. The primary objective of this instrument is to provide financial advisers with additional time to deliver Statements of Advice (SOAs) to clients without contravening the statutory timelines set out in the Corporations Act. This relief is intended to ensure that the advice-giving process is not compromised during this critical period, thereby facilitating smoother transitions for clients affected by the new superannuation laws.
The instrument exempts providing entities from the usual requirement to issue SOAs within the standard timeframe, permitting them to deliver SOAs within 30 days after providing advice, provided the advice pertains to superannuation products in relation to the new legislation, the client specifically requested the advice before 1 July 2017, and the advice was given before that date. Furthermore, if the advice involves a financial product subject to a cooling-off period, the entity must inform the client in writing about their cooling-off rights and that the SOA may not be provided until after the cooling-off period expires. This exemption is contingent on the SOA being delivered as soon as practicable after the advice is given.
Scope and Application
The ASIC Corporations (Urgent Superannuation Advice) Instrument 2017/530 applies to financial advisers who are providing entities under the Corporations Act 2001. It specifically targets those giving personal advice on superannuation products in light of the changes introduced by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016, which came into effect from 1 July 2017. The instrument provides relief to these entities by extending the timeframe within which Statements of Advice (SOAs) must be provided to clients, from the usual statutory timeframes to a maximum of 30 days after the advice is given. This extension is conditional upon certain criteria being met, including the advice being about superannuation products related to the new laws, being requested by the client before 1 July 2017, and the provision of a written warning to clients about any cooling-off periods that may apply to the financial products involved. The instrument operates on a Commonwealth level, applying nationally, and it is subject to the condition that the SOA is provided as soon as practicable after the advice is given.
Key Provisions
The main operative sections of the ASIC Corporations (Urgent Superannuation Advice) Instrument 2017/530, referred to as the Instrument, are sections that provide exemptions from the statutory timelines for providing Statements of Advice (SOA) in the context of superannuation advice given before 1 July 2017. Specifically, section 5 of the Instrument allows providing entities to give an SOA within 30 days after providing the advice, provided certain conditions are met. These conditions include that the advice pertains to superannuation products in connection with changes due to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016, the client expressly requests the advice before 1 July 2017, and the advice is given before 1 July 2017. Additionally, if the advice involves a financial product subject to a cooling-off period, the entity must provide a written statement explaining the cooling-off rights to the client at the time the advice is given.
The Instrument imposes specific obligations on providing entities. Firstly, they must ensure that the SOA is provided within 30 days after the advice is given, but only under the circumstances outlined in the Instrument. Secondly, if the advice relates to a financial product with a cooling-off period, the providing entity must furnish the client with a written statement that details the nature of the cooling-off rights and informs the client that they may not receive the SOA until after the cooling-off period has expired. This written warning must be provided at the same time as the advice. The Instrument also mandates that the SOA be given as soon as practicable after the advice is provided, reinforcing the need for timely communication.
In terms of consequences for non-compliance, the Instrument does not explicitly state penalties for failing to adhere to its provisions. However, the overarching Corporations Act 2001 does contain general provisions for penalties in cases of non-compliance. For instance, under section 1317E of the Act, a person who contravenes a civil penalty provision may be subject to a pecuniary penalty of up to $210,000 for a corporation and up to $42,000 for an individual, depending on the severity and nature of the breach. Additionally, breaches that involve dishonest conduct may result in criminal charges, with potential penalties including imprisonment. It is essential for providing entities to comply with the Instrument to avoid potential enforcement actions under the broader legislative framework.