FOFA changes to affect education benefits

Changes to the definition of conflicted remuneration would increase adviser education benefits.

20-Jan-2016

By Elizabeth Somerville

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Changes to the Future of Financial Advice (FOFA) bill that passed through the Senate with bipartisan support in November last year would lead to an increase in the training and educational benefits allowed to advisers under the new definition of conflicted remuneration.

Imac legal and compliance director and principal lawyer Ian McDermott told financialobserver changes to the wording of the bill broadened the provisions surrounding conflicted remuneration, which would result in more education and training benefits becoming exempted from being considered conflicted remuneration.

“It’s not all education or training is exempt, but the definition is broader so more things will be exempt,” McDermott said.

“This is because the current provision in section 963C(c)(ii), which reads ‘the benefit is relevant to the provision of financial product advice to persons as retail clients’, is to be repealed and replaced with ‘the benefit is relevant to the carrying on of a financial services business’.

“The new provision is much broader, so that more training and education benefits will not be considered conflicted remuneration as long as they are relevant to carrying on a financial services business.”

The existing section of regulation, which set out circumstances where benefits given to representatives of an authorised deposit-taking institution would not be considered conflicted remuneration, was also repealed and would be replaced by a new and expanded section to clarify what would not be considered conflicted remuneration.

In addition, a note was added to one section to clarify conflicted remuneration could include “causing or authorising” such benefits to be given, McDermott said.

A number of subsections were also deleted from the passed bill that specified the timing rules for determining if a benefit was conflicted or not and removed benefits given in relation to general advice from being conflicted remuneration.

“However, despite the fact that the deleted subsections will now not become law, a new section 963B(4) was introduced which enables regulations to be made which may amend when a benefit may be conflicted remuneration,” McDermott said.

“And a note was introduced at the end of section 963B to define intra-fund advice.”

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