The new regulation is intended to improve the operation of FOFA
by alleviating a number of unintended consequences of the original
FOFA laws. At their heart, the regulations:
result in a consistent treatment of the wholesale client/retail
client distinction for the purposes of FOFA laws by inserting new
provisions into 761G Corporations Act 2001 (Cth) to clarify a
person does not need to be treated as a "retail client"
acquire a product or service for a company or trust that they
meet the "net assets" test when including the net
assets and gross income of a company, or trust that a person
are a related body corporate of a wholesale client; or
are a "professional investor".
These changes are effected by amending Corporations Regulations
2001 (Cth) 7.6.02AB, AC, AD and AE;
modify the application of the "best interests" duty
for basic banking products and general insurance products by:
ensuring the availability of the modified best interests duty
for basic banking and general insurance products where, at the same
time, advice is also being given on a consumer credit insurance
product (but section 961B must still be satisfied in respect of the
consumer credit insurance product);
providing that a person does not need to satisfy the steps set
out in sections 961B(2)(d) to (g) of the Act when providing advice
on a general insurance product; and
extending the definition of "basic banking product"
for the purpose of the best interests duty to include facilities
for making non-cash payments that are not related to basic deposit
products (for example, travel money cards).
These changes are effected by repealing regulation 7.7A.1 and
substituting new regulations 7.7A.05, .06 and .07; and
inserting new notes into regulation 7.7A.12 to clarify the
application of the conflicted remuneration provisions while also
amending regulation 7.7A.12H(a)(iii) to extend the exemption from
the conflicted remuneration regime to consumer credit insurance
products in certain circumstances.
In addition to these amendments, the Assistant Treasurer has
foreshadowed future reforms to come in the second half of the year.
These future reforms are undergoing further consultation and relate
to the following:
changes to the 'mixed benefits' and 'intra-fund
new powers for regulations to determine that certain benefits
are caught by the ban on conflicted remuneration; and
extend and align the periods of time that an adviser has to
send an opt-in renewal notice and a fee disclosure statement to
their client to 60 days, to facilitate adviser compliance.
If these future reforms are enacted, the Federal Government has
indicated it will consider the FOFA laws finalised and should be
given time to work. However, if the legislative history of FOFA and
the political football it has become are reliable indicators,
achieving this lofty ambition may prove difficult for the
We will continue to monitor the important developments in this
area. Should you have any questions please contact a member of our
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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