In this blog series, we will take a look at the regulatory
issues that financial advisers will face over the next 12
The FOFA reforms have been the biggest story in financial
regulation over the last few years. The change of government and
subsequent rounds of amendment and repeal left the industry in a
state of uncertainty. We expect further guidance from ASIC on the
FOFA reforms. As you would recall, the Abbot Government's
amendments to FOFA were disallowed by the Senate last November,
reinstating the Gillard Government's reforms. Subsequent
regulations reintroduced the grandfathering provisions, but no
moves have been made to reintroduce any other elements of the
Abbott Government's changes.
The result of these legislative changes means that there was a
period between December 2013 and November 2014 where advisers may
have been complying with regulations that never were law.
Technically, this meant that any licensee who complied with
those laws was in breach of their AFSL and the Corporations
At the time of the disallowance, ASIC announced that it would
take a "facilitative approach until 1 July 2015". No
further statements have been made at this time. We do not
anticipate that ASIC will pursue action against licensees who took
legal positions in good faith according to the situation at the
time. However, ASIC will need to clarify exactly how it will
approach enforcement of the FOFA reforms.
We also note that the opt-in provisions continue to be
contentious. A number of professional bodies are lobbying to roll
back the start date, and it will be interesting to see if any of
those bodies adopt their own opt-in code of conduct. We anticipate
that this area will continue to be a point of discussion in
It is old news to most that ASIC is currently under budgetary
pressures. Budget reductions last year mean that, by the end of the
current financial year, ASIC will have reduced its headcount by
20%. ASIC has stated that its reduced resources will mean a greater
shift to risk-based surveillance, especially focused on high risk
areas that have the greatest market impact. ASIC's Strategic
Outlook for the current financial year provided some outline of the
priorities that ASIC will be focusing on.
These areas include:
leases for household goods;
financial advice, especially advice relating to SMSFs; and
managed investment schemes.
The quality of financial advice remains a key concern for ASIC,
especially in the wake of the CBA and Macquarie Private Wealth
scandals. These concerns have also been highlighted in recent
parliamentary inquiries, including the Financial Systems Inquiry.
There are also indications that ASIC is considering moving to a
user-funded system, similar to the funding model at APRA. This was
a recommendation of the Financial Systems Inquiry that we believe
has support in the current political climate.
Such a move would likely involve some form of levy on the
regulated population that would be tied to the size and/or the
regulatory risk of the relevant business – for example,
superannuation funds currently pay a levy to APRA based upon their
level of funds under management.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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