The new regulations were finalised on 26 June and registered yesterday. The new rules commence today.
The main changes in the regulation apply to conflicted remuneration, grandfathering, the best interests duty and ongoing fee arrangements.
A note from law firm Minter Ellison pointed to a number of “important conflicted remuneration exemptions” for general advice and low-value performance bonuses; the extension of the employee exemption by one year to 1 July 2015; the removal of impediments to adviser movement; changes to the best interest duty; and exemptions from opt-in notices and fee disclosure statements for existing clients.
Under the regulation, the contentious ‘pass through’ exemption will apply to exempt remuneration, but not to grandfathered remuneration.
“Although it is a pity this exemption does not extend to grandfathered benefits, it does avoid the need to seek client directions to pass on benefits to advisers,” said Minter Ellison.
The general advice exemption will apply to any individual representative (ie, it will not be limited to employees) as long as the benefit is not a commission; no personal advice is given except in relation to banking, general insurance or consumer credit insurance; or the product is a ‘badged’ product.
The regulation also covers exempt remuneration in relation to stamping fees, training, ‘execution only’ advice, banking and general insurance, and ‘mixed benefits’.
The grandfathering regulations permit adviser movement by permitting the pass-through of grandfathered remuneration where a representative becomes an authorised representative of another licensee.
The same regulations also allow benefits to be transferred as part of the sale of a business.
When it comes to the best interests duty, the reference to ‘client instructions’ in the first line of the safe harbour is removed; the catch-all step is effectively repealed; the banking exemption is extended to non-cash payment facilities and to general and consumer credit insurance; and a general insurance exemption will apply where advice is given about other products.
Financial planners will also be exempt from the opt-in obligation between 1 July 2014 and 31 December 2015. In addition, clients who entered into an ongoing fee arrangement before 1 July 2013 will be exempt from fee disclosure statements during the same period.
