EXPLANATORY STATEMENT

Select Legislative Instrument No. 210, 2014

Issued by authority of the Treasurer

Corporations Act 2001

Corporations (Statements of Advice) Repeal Regulation 2014

Subsection 1364(1) of the Corporations Act 2001 (the Act) provides that the Governor‑General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed, for carrying out or giving effect to the Act.

The Corporations (Statements of Advice) Repeal Regulation 2014 (the Regulation) relates to the financial disclosure requirements provisions of the Act.  In particular, the Regulation repeals the Corporations Amendment (Statements of Advice) Regulation 2014 (the Statements of Advice Regulation).  The Statements of Advice Regulation would have made a number of amendments to the Corporations Regulations 2001 (the Principal Regulations) when it commences on 1 January 2015.

The Government announced on 15 July 2014 that it would implement changes to the Statement of Advice requirements in exchange for the support of the Palmer United Party and the Australian Motoring Enthusiast Party in passing the Future of Financial Advice (FOFA) reforms; these changes were implemented through the Statements of Advice Regulation.  The Government has decided to repeal the Statements of Advice Regulation as the agreement with the Palmer United Party and the Australian Motoring Enthusiast Party is no longer in force.

The Regulation repeals additional disclosure requirements introduced by the Statements of Advice Regulation.  The Regulation also repeals requirements that the adviser and the client sign the Statement of Advice, as well as sign instructions for further or varied advice.

Consultation was undertaken on the Statements of Advice Regulation with the financial services industry, with targeted consultation on the drafting the Statement of Advice Regulation and public consultation through the Senate Economics Legislation Committee (the Committee) inquiry into the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014, which contained substantially the same provisions as the Statements of Advice Regulation.  The Committee received 17 submissions.

Details of the Regulation are set out in the Attachment.

The Regulation is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

The Corporations Act 2001 does not specify any conditions that need to be satisfied before the power to make the Regulation may be exercised.

This Regulation commences on the day after it is registered.

ATTACHMENT

Details of the Corporations (Statements of Advice) Repeal Regulation 2014

Section 1 — Name of Regulation

This section provides that the name of the Regulation is the Corporations (Statements of Advice) Repeal Regulation 2014 (the Regulation).

Section 2 — Commencement

This Regulation commences on the day after it is registered.

Section 3 — Authority

This Regulation is made under the Corporations Act 2001 (the Act).

Section 4 — Schedule(s)

This section provides that Schedule 1 repeals the Corporations Amendment (Statements of Advice) Regulation 2014 (the Statements of Advice Regulation).

Schedule 1—Repeals

Item 1 repeals the Statements of Advice Regulation.

The Regulation repeals the following requirements, which would have commenced on 1 January 2015:

•                 that a Statement of Advice must be signed by the adviser, as well as signed by the client to acknowledge receipt;

•                 that if a client, after receiving the Statement of Advice, requests further or varied advice (this may be necessary, for example, if the client’s relevant circumstances change), the providing entity must ensure that instructions from the client are: documented in writing; signed by the client; and acknowledged by the providing entity, or an individual acting on behalf of the providing entity;

•                 that advisers must include the following statements and information in the Statement of Advice to ensure clients are aware of their existing rights under the Act:

–               that the adviser is required to act in the best interests of their client and prioritise their client’s interests ahead of their own, consistent with the requirements in sections 961B and 961J of the Act;

–               that any fees must be disclosed and that the adviser will provide a fee disclosure statement annually, if the client enters into an ongoing fee arrangement to which Division 3 of Part 7.7A of the Act applies (which will generally be arrangements entered into on or after 1 July 2013);

–               that a client may have the right to return financial products under a 14-day cooling-off period in accordance with Division 5 of Part 7.9 of the Act;

–               that the adviser genuinely believes that the advice he or she is providing to the client is in the client’s best interests, given the client’s relevant circumstances; and

–               that the client has the right to seek further or varied advice from their adviser at any time, for example, if they experience a change in their circumstances.

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Corporations (Statements of Advice) Repeal Regulation 2014

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

The purpose of the Legislative Instrument is to repeal the Corporations (Statements of Advice) Repeal Regulation 2014 (Statements of Advice Regulation).  Repealing the Statements of Advice Regulation would repeal the following requirements, which were to have commenced on 1 January 2015:

•                 that a Statement of Advice must be signed by the adviser and the client;

•                 that if a client, after receiving the Statement of Advice, requests further or varied advice, the providing entity must ensure that instructions from the client are: documented in writing; are signed by the client; and acknowledged by the providing entity, or an individual acting on behalf of the providing entity; and

•                 that advisers include the following statements and information in the Statement of Advice to ensure clients are aware of their existing rights and the adviser’s obligations in the Act:

–               that the adviser is required to act in the best interests of their client and prioritise their client’s interests ahead of their own, consistent with the requirements in sections 961B and 961J of the Act;

–               that any fees must be disclosed and that the adviser will provide a fee disclosure statement annually, if the client enters into an ongoing fee arrangement to which Division 3 of Part 7.7A of the Act applies (which will generally be those entered into on or after 1 July 2013);

–               that a client has the right to return financial products under a 14-day cooling-off period in accordance with the arrangements under Division 5 of Part 7.9 of the Act;

–               information that the adviser genuinely believes that the advice he or she is providing to the client is in the client’s best interests, given the client’s relevant circumstances; the term ‘relevant circumstances’ is given meaning by section 961B of the Act; and

–               that the client has the right to seek further or varied advice from their adviser at any time, for example, if they experience a change in their circumstances.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.