Australia: Government’s Corporation Reform Package – Financial Services

Last Updated: 12 June 2007
Article by Marianne Robinson and Robert Tobias

On 24 May 2007, the Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 was presented to Parliament for its Second Reading speech. The Bill is intended to simplify aspects of the current regulatory system but it is of note that the Bill itself exceeds 70 pages and the Explanatory Memorandum exceeds 180 pages.

The reforms follow the recommendations in the ‘Rethinking Regulation’ report of the Banks Taskforce on Reducing the Regulatory Burden on Business and the release of the Corporate and Financial Services Regulation Review Proposals Paper in November 2006. However, not all of the proposals have been incorporated in this round of reforms.

This update addresses the reforms specific to Chapter 7 of the Corporations Act 2001 (Cth). It should be noted that there are reforms to other chapters of the Act which impact on financial services. The reforms to Chapter 5 Fundraising Activities are addressed in a separate update.

The provision of financial advice

The definition of advice in Section 766B has caused considerable debate since its introduction in 2002. In particular, the broad definition of general and personal advice has been the subject of intense debate. This round of reforms do not adopt the proposal to distinguish pure sales activity from financial advice. Lack of agreement in relation to how this should be defined has caused the Government to seek further consultation with stakeholders.

Record of Advice - small investments

It has been estimated that approximately 720,000 Statements of Advice are issued each year at an average preparation cost to advisors of $260 for each advice. The reforms attempt to balance the needs of consumers and the burden of the compliance costs associated with the FSR disclosure requirements by introducing Section 946AA. Providing entities will no longer be required to provide a Statement of Advice (SOA) where the total value of all investments in relation to which advice is provided is below the prescribed threshold amount. This Section will not apply to advice in relation to derivatives, general insurance, life risk products or any superannuation product (other than one in which the client already has an interest).

The threshold (which has been prescribed at $15,000) will apply to advice related to acquisitions as well as disposals. The method for calculating the threshold amount for particular kinds of financial products will be a matter for regulation.

If a SOA is no longer required because of the application of the threshold, the providing entity will now have to keep a Record of Advice (ROA), a copy of which must be given to the client together with disclosure of remuneration and other interests required to be disclosed in a SOA. This reform, while intended to reduce the burden on advisors, will require certain enquiries to be made as well as a determination of the client’s status before a decision can be made as to whether or not a SOA or a ROA will be required.

It is intended that the ROA be a more concise document than the SOA. The Second Reading Speech emphasises that there will still be a requirement that the advice provided will be reasonable having regard to the client’s circumstances.

The SOA exemption given to general insurance products (other than sickness and accident and consumer credit) will remain.

What has been left unanswered by the reforms is which disclosure requirement will apply when a person who initially receives a ROA requires additional advice and the value of their financial product has increased over the threshold amount. Whether this will trigger the requirement to give a SOA or whether qualification to receive a ROA applies during the entire relationship is not yet clear.

Personal advice - no product recommendation and no remuneration

The Government has responded to concerns that a client seeking a minor piece of personal advice requires the advisor to produce a new SOA. In order to reduce the cost of such advice the reforms introduce new Section 946B(7) which will permit the use of a ROA in certain no recommendation - no remuneration situations. However, when giving the advice referred to in Section 946B(7) the client must still be provided with disclosure of remuneration and other interests required by Section 947(2)(d) and (e) or Section 947C(3)(e)(f).

Consequential amendments are being made to clarify the definition of defective disclosure statements to reflect the introduction of the ROA and to set out how documents, information and statements are to be given.

PDS in use notice and online reporting requirements

In 2005, ASIC received 12,000 PDS in use notices which were of limited regulatory use because the data provided did not assist ASIC to determine whether or not the information contained in the PDS was out of date or the product withdrawn from the market. Product issuers will be required to lodge an online report notifying ASIC when the PDS is first in use. There will be additional notification triggers imposed on issuers requiring the electronic lodgement of information when a PDS is out of use or when changes have been made to the fees or charges in the enhanced fee disclosure table. A fee will only be charged on the filing of the in use notice.

Despite industry lobbying for a change to the five day reporting requirement, the reporting period remains unchanged.

The modification to require electronic lodgement is scheduled for a delayed commencement on 1 January 2009. No mention is made in the reforms of the date for the introduction of the additional reporting requirements. These are likely to be introduced by Regulation.

Non cash payment facilities

The Government has announced that disclosure requirements for non cash payment facilities that are not related to basic deposit products will be streamlined. These changes are not in the reforms and are to be introduced by Regulation.

Cross endorsement of authorised representatives

Amendments to Division 6 of Part 7.6 will the have the effect of amending the cross endorsement provisions in that licensees will only be jointly and severally liable for the conduct of their authorised representatives when the representatives provide financial services in relation to financial products that are of the same sub-class of financial product. This reform will be supported by changes to the Regulations and until these are released it will not be known which financial products this reform will apply to.

Sophisticated investors

The definition of retail client contains a number of tests to determine whether a client is a retail or wholesale client. The reforms recognise that there are some investors who by experience or training prefer to have the status of a wholesale investor. Section 708(10) already provides a mechanism which allows experienced investors to be certified as a wholesale client but this is restricted in its application to securities. This reform brings the provisions of Chapter 7 in line with the provisions of Chapter 6D by inserting a new test (Section 761GA) to allow the licensee to determine whether the client has the required experience and expertise and to then obtain a written acknowledgement from the client to the effect that a PDS has not been provided and that the licensee has no obligation to treat the client as a retail client.

How this reform will work in practice across a range of financial products more complex than shares will be of interest, especially if the client’s perception of their expertise and experience is at odds with that of the licensee. The onus will be on the licensee to make a determination of the client’s status before or at the time of the provision of the product or the advice.


Many of the financial services related reforms introduce new triggers, forms or new tests into the relationship between the licensee and the client or the license and ASIC. It is unclear whether these reforms will in practice simplify compliance and reduce cost or whether they have added to the compliance requirements.

Phillips Fox has changed its name to DLA Phillips Fox because the firm entered into an exclusive alliance with DLA Piper, one of the largest legal services organisations in the world. We will retain our offices in every major commercial centre in Australia and New Zealand, with no operational change to your relationship with the firm. DLA Phillips Fox can now take your business one step further − by connecting you to a global network of legal experience, talent and knowledge.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.