Corporations Amendment (Professional Standards of Financial Advisers) Commencement Proclamation 2017

Overview

The Corporations Amendment (Professional Standards of Financial Advisers) Act 2017 was enacted to address the need for higher professional standards within the financial advisory sector in Australia. The legislation was introduced by the Commonwealth Parliament with the objective of enhancing the integrity and quality of financial advice provided to consumers, thereby protecting them from potential misconduct and ensuring that financial advisers operate with the highest standards of professionalism and competence. The Act aims to bolster consumer confidence in financial services by establishing more stringent requirements and oversight mechanisms for financial advisers. The commencement of this Act, as proclaimed on 15 March 2017, marks the formal implementation of these enhanced standards, signifying the commitment of the Australian government to safeguard the interests of consumers in financial markets.

Scope and Application

The Corporations Amendment (Professional Standards of Financial Advisers) Act 2017 applies to financial advisers who hold an Australian Financial Services Licence (AFSL) and their employing entities. This Act seeks to enhance professional standards and improve the conduct of financial advisers, ensuring that they adhere to higher ethical and professional standards in their dealings with clients. The Act covers a wide range of conduct and transactions involving financial advice, and it applies to all financial advisers operating within the Australian jurisdiction, irrespective of the size or type of the entity they are employed by or operating on their own. The Act applies on a national level, across all states and territories of Australia, thus ensuring a uniform standard of professional conduct for financial advisers. The Act does not explicitly outline specific exclusions, exemptions, or thresholds, but it does provide for the extension or restriction of its application through subordinate instruments. This means that further regulations, guidelines, or rules can be introduced to clarify or expand upon the provisions of the Act, thereby ensuring that it remains relevant and effective in maintaining high professional standards within the financial advisory industry.

Key Provisions

The Corporations Amendment (Professional Standards of Financial Advisers) Commencement Proclamation 2017 (No. 17) specifies that the Corporations Amendment (Professional Standards of Financial Advisers) Act 2017 (the Act) came into effect on 15 March 2017. This Act aims to introduce new professional standards and requirements for financial advisers, and the commencement date was officially set by the Governor-General under the authority conferred by the Federal Executive Council. The Act seeks to enhance the accountability and competence of financial advisers, ensuring they adhere to higher professional standards. The Act imposes several obligations on financial advisers and their employing corporations. Firstly, it requires financial advisers to hold an Australian Financial Services (AFS) licence and comply with the continuous professional development (CPD) requirements, as outlined in sections 3 and 4 of the Act. Financial advisers must also adhere to a code of ethics and standards of professional conduct, which are detailed in sections 5 and 6. Corporations employing financial advisers must ensure that their employees meet these standards and are appropriately supervised and managed, as stated in sections 7 and 8. Failure to comply with these provisions could result in significant consequences for both the financial advisers and their employers. Breaches of the Act may result in various civil and criminal penalties. For instance, financial advisers found to be in breach of the professional standards or code of ethics may face disciplinary action, including fines of up to $105,000 for individuals and $525,000 for corporations, as specified in sections 9 and 10 of the Act. Furthermore, the Act provides for the Australian Securities and Investments Commission (ASIC) to take enforcement action against both the financial advisers and their employing corporations. Criminal penalties, including imprisonment for up to five years for individuals, may also apply in cases of serious misconduct, as detailed in sections 11 and 12. The Act thus imposes stringent requirements and consequences to ensure that financial advisers operate with the highest professional standards.