Future of Financial Advice (FOFA)

Updated 1 July 2014

The Australian financial services industry is undergoing significant reform aimed at improving the trust and confidence of Australian retail investors in the financial planning sector. The reforms are the Australian Government's response to the Parliamentary Joint Committee on Corporations and Financial Services' Inquiry into financial products and services in Australia.

The FOFA legislation commenced on 1 July 2012 with a voluntary compliance period until 1 July 2013. 

FOFA resources

This page outlines key policy documents, government announcements, links to the legislation, Minter Ellison Alerts and other commentary relating to FOFA.


Key developments

Date Activity Relevant Links 
 16/7/14

The Government's deal with the Palmer United Party requires inclusion of the following in Statements of Advice (SOAs) which also have to be signed by the adviser and the client:

  • The adviser is required to act in the client's best interests and to prioritise the client's interests
  • The adviser genuinely believes that the advice is in the client's best interests given their circumstances
  • Fees must be disclosed
  • A Fee Disclosure Statement will be provided annually for 'new' (ie post-1 July 2013) clients
  • Details of cooling off period
  • The client has the right to change their instructions

These are not new requirements but the requirements to state them in the SOA (with the exception of fee disclosure) and to have the SOA signed are. Regulations will be introduced within 90 days to introduce them, along with the requirement that any instruction to alter or review instructions must be in writing, signed by the client and acknowledged by the adviser, adding red tape to the process. The changes will then be included in the FOFA Streamlining Bill.

 
 30/6/14

Government registers the Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014. Key elements of the Regulation include:

  • important conflicted remuneration exemptions, including when passing on exempt remuneration, for general advice and low value performance bonuses
  • extending the employee exemption by 1 year to 1 July 2015 (or 18 months after the nominal expiry date of the enterprise agreement)
  • removing impediments to adviser movement
  • changes to the best interests duty, and
  • exemptions from opt-in notices and fee disclosure statements for existing clients.

Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014 

Explanatory Statement

Article: FOFA regulations finally made

 26/6/14

Senate Economics References Committee releases its report on the Performance of ASIC. Key recommendations in the report include:

  • implementing more effective surveillance to detect deficiencies in compliance arrangements 
  • reviewing ASIC's internal systems and competencies for identifying and dealing with serious complaints and reports and early signs of wrongdoing 
  • providing more funding for enforcement 
  • establishing a Royal Commission or judicial inquiry into misconduct within CBA
  • expanding whistleblower protections and consider reward-based incentives
  • introducing higher standards for planners and compulsory professional association membership, and
  • imposing suitability obligations on product issuers.

The Report does not recommend any changes to the FOFA regime.

Senate Economics References Committee Report

Senate report on ASIC released

 16/6/14

Senate Economics Legislation Committee tables its report on the FOFA amendment bill. The majority of the Committee made two recommendations:

  • the Explanatory Memorandum include a paragraph that clearly and unambiguously spells out the best interests obligations—961B(1) and (2), 961G, 961J and 961H—and the level of consumer protection they provide; and
  • the Explanatory Memorandum should make clear that it is not the government's intention to reintroduce commissions.

Senate Economics Legislation Committee Report

Article: Senate FOFA report

 22/5/14

Partners Richard Batten and Chris Brown appear before the Senate Economics Legislation Committee on the FOFA Bill. Key elements that came up in the hearing are:

  • removing the catch-all step from the best interests duty;
  • the proposed exemption from the ban on conflicted remuneration for general advice; and
  • the repeal of the opt-in requirement in relation to clients on ongoing fee arrangements.
 Transcript of proceedings
 30/4/14 Minter Ellison lodged a submission with the Senate Economics Legislation Committee, in relation to its Inquiry into the provisions of the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014. The Committee has a reporting date of 16 June 2014 Minter Ellison submission
 24/3/14  The Finance Minister announces that the government has decided to pause implementation of FOFA amendments. Media release
 21/3/14 The Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 was tabled in Parliament on 19 March 2014. The FOFA amendment regulations have not however been released at this stage, although we understand they are imminent. FOFA Bill tabled in Parliament 
 20/2/14 Minter Ellison lodged a submission with Treasury in relation to the amendments proposed in the Exposure Drafts of the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 and the Corporations Amendment (Streamlining of Future of Financial Advice) Regulation 2014 Minter Ellison submission
 29/1/14

The Assistant Treasurer announces that the Government has released for public consultation draft regulations and legislation to enact its announced reforms to FOFA.

The proposed Bill includes the following key amendments:

  • removing the ‘opt-in’ requirement;
  • making the requirement for advisers to provide a fee disclosure statement only applicable to clients who entered into their arrangement after 1 July 2013;
  • removing paragraph 961B(2)(g), from the best interests obligation;
  • facilitating the provision of scaled advice; and
  • exempting from the ban on conflicted remuneration, benefits relating to general advice.

The proposed Regulation makes changes in relation to grandfathering, balanced scorecards, bonuses paid in relation to 'permissible revenue,' the stamping fee exemption,  brokerage fee exemptions, the wholesale and retail client distinction and ‘mixed benefits’ provisions.

Assistant Treasurer's Media Release

Exposure Draft - FOFA Amendments

Minter Ellison Alert | FOFA Bill and Regulations released for public consultation

 14/1/14 The Office of Best Practice Regulation has released the Regulation Impact Statement on the government's proposals to amend FOFA, prepared by Treasury in November 2013 (RIS).

 FOFA reforms RIS issued

 23/12/13 The Coalition Government announced that it will make good on its election promises to fix some of the problems of FOFA and more. ASIC has confirmed that it 'will not take enforcement action in relation to the specific FOFA provisions that the Government is planning to repeal.'

Minter Ellison Alert | Government's proposals to reform FOFA

 

13/10/13

Speech given by Assistant Treasurer Arthur Sinodinos at the Association of Financial Advisers' National Conference stating:

  • at the top of the Government's agenda are changes to remove the opt-in requirements;
  • insurance remuneration is another top priority; and
  • the process by which the Government will work through the FOFA issues with stakeholders will shortly be announced.
Speech - Plenary Address to the Association of Financial Advisers
31/7/13 

ASIC Releases Consultation Paper 214 Updated record-keeping obligations for AFS licensees which contains proposals to amend the record-keeping obligations for those who provide financial advice. Proposals include requiring the following information to be kept:

  • records to prove that the licensee and its representatives have complied with the best interests duty and related obligations
  • records of ongoing fee arrangements entered into with a client
  • copies of documents - such as, fee disclosure statements and renewal notices - that fee recipients must receive for an ongoing fee arrangement, and
  • records to prove the licensee and its representatives have complied with the ban on conflicted remuneration.

Comments close 23 October 2013. 
 

ASIC Media Release 13-196MR

Consultation Paper 214 Updated record-keeping obligations for AFS licensees (CP214)

17/6/13

Regulations registered which extends the scope of existing stockbroking-related exemptions to provide that:

  • brokerage fees are exempt from the ban on asset-based fees on borrowed amounts; and 
  • fees can be paid between licensees in relation to the dealing on behalf of the retail clients, where those trades are requested by the client through online ‘white-label’ trading services and where clients do not receive personal advice.

Corporations Amendment Regulation 2013 (No. 4)

Explanatory Statement

28/6/13

Regulations registered which deal with grandfathering and buyer of last resort arrangements. The Regulations:

  • cut off grandfathering for new clients and, apart from platforms, new investments from 1 July 2014;
  • extend grandfathering for employees to 1 July 2014 (and later for some enterprise agreements);
  • exclude BOLR arrangements; and
  • preserving grandfathering for changes of parties or where the arrangement only terminates because of FOFA.

One key addition is permitting grandfathered benefits to be passed through to representatives or others.

Corporations Amendment Regulation 2013 (No. 5)

Explanatory Statement

14/6/13 

ASIC releases Information Sheet about applying for a limited Australian financial services licence.

Information Sheet 179 Applying for a limited AFS licence (INFO 179)

ASIC Media Release 13-140MR

4/6/13

Regulation registered which:

  • removes the accountants’ licensing exemption in regulation 7.1.29A from 1 July 2016;
  • provides that recognised accountants, partnerships or corporations who apply for an AFSL between 1 July 2013 and 30 June 2016 and only provide particular advice services do not have to demonstrate that they meet the experience required for the purposes of the organisational competence requirement in section 912A(1)(e);
  • provides that licensees who receive an AFSL under this streamlined process must within three years of being granted the licence, if requested in writing by ASIC, demonstrate to ASIC they have the requisite knowledge and the competence to provide the financial services covered by their licence; and
  • provides that any licensee who only provides particular advice services and does not handle client-money can lodge an annual compliance certificate instead of an auditor’s report.

Corporations Amendment Regulation 2013 (No. 3)

Explanatory Statement

16/5/13

Regulation made providing:

  • Part 7.7A of the Act does not have effect in relation to retail clients not in this jurisdiction; and
  • an exemption from the obligations in Division 2 of Part 7.7A of the Act (the best interests obligations) for financial advice providers in situations where the conditions in certain ASIC Class Orders are satisfied.

Corporations Amendment Regulation 2013 (No. 2)

Explanatory Statement

7/5/13

Treasury releases an exposure draft of regulations to provide that:

  • brokerage fees are exempt from the ban on asset-based fees on borrowed amounts; and
  • fees can be paid by licensees that execute trades on behalf of the retail clients of other licensees, where those trades are requested by the client through the non executing licensee's online trading service, under circumstances where clients do not receive personal advice.

Draft grandfathering regulations  (5/5/13)

Explanatory Statement to the draft regulations 

11/4/13

ASIC announces delay in the proposal to introduce a national examination for financial advisers. ASIC indicated:

  • this was to allow appropriate time for other reforms to be implemented in the financial advice sector, notably the FOFA package; and
  • in the coming months, it will also consult on enhancements to the training standards for financial product advisers.

ASIC's Media Release (11/4/13)

4/3/13 Treasury releases an exposure draft of regulations dealing with grandfathering and buyer of last resort arrangements

Draft grandfathering regulations

Explanatory Statement to the draft regulations

Minter Ellison Commentary (4/3/13)

4/3/13

Treasury releases an exposure draft of regulations dealing with grandfathering and buyer of last resort arrangements

Draft grandfathering regulations

Explanatory Statement to the draft regulations

Minter Ellison Commentary (4/3/13)

4/3/13

ASIC releases guidance on conflicted remuneration ban

ASIC's Media Release (4/3/13)

Regulatory Guide 246: Conflicted remuneration (RG246)

Minter Ellison Commentary (4/3/13)

1/3/13

ASIC releases updated guidance related to approval of codes of conduct

ASIC's Media Release (1/3/13)

Regulatory Guide 183: Approval of financial services sector codes of conduct (RG183)

Minter Ellison Commentary (4/3/13)

27/2/13

The Minister for Financial Services and Superannuation announced:

  • regulations to replace the accountants' licensing exemption with a limited Australian Financial Services Licence will be finalised in April 2013;
  • the new licence will be open to accountants and other financial practitioners;
  • an application process will apply from 1 July 2013 to 1 July 2016. 
     

Minister's Media Release (27/2/13)

21/2/13

During a Senate Estimates Committee hearing, Treasury officials indicated:

  • they expect the Minister for Financial Services to outline rules around FOFA grandfathering within the next few weeks; and
  • the way the grandfathering arrangements were drafted were, in Treasury's view, liberal permissive and went too far

Coverage of comments by Treasury officials at Senate estimates Committee Hearing

6/2/13

Speech given by ASIC Commissioner Peter Kell stating:

  • ASIC is currently on track to release additional regulatory guidance on its approach to professional codes of conduct and conflicted remuneration in the next few weeks.
  • 'In most cases' a code sponsor would be an industry association.
  • In the final code of conduct guidance ASIC will be proposing a more detailed checklist.
Coverage of speech by Peter Kell regarding codes of conduct
4/2/13 Speech given by Bernie Ripoll (Parliamentary Secretary to the Treasurer) to the Financial Advice in Super Symposium reiterates the Government will exempt intra-fund advice fees from the FoFA adviser charging regime. Speech - Address to the Financial Advice in Super Symposium
25/1/13 ASIC releases guidance on FOFA fee disclosure statements

ASIC's Media Release

Regulatory Guide 245: Fee disclosure statements (RG 245)

13/12/12 ASIC releases guidance related to best interests duty and scaled advice

ASIC Media Release

Regulatory Guide 175 Licensing: Financial product advisers – conduct and disclosure (RG 175)

Regulatory Guide 244 Giving information, general advice and scaled advice (RG 244)

28/11/12 Draft Accountant's Exemption replacement regulation released

Draft Regulation

Explanatory Statement

Minister's Media Release (28/11/12)
28/11/12 Draft legislative amendments relating to the use of the expressions 'financial planner' and 'financial adviser' released

Draft Corporations and Consumer Legislation Amendment (Consumer Financial Protection) Bill 2012

Explanatory Memorandum

Minister's Media Release (28/11/12)
27/11/12 Regulations on best interest duty and conflicted remuneration ban exemptions commence

Corporations Amendment Regulation 2012 (No. 10)

Explanatory Statement

Minter Ellison Alert (30/11/12)

23/10/12 ASIC release FOFA consultation paper relating to Approval of codes of conduct for exemption from opt-in requirement  

Consultation Paper 191 Future of Financial Advice: Approval of codes of conduct for exemption from opt-in requirement

ASIC's Media Release (23/10/12)

Minter Ellison Alert (2/11/12)

 3/10/12  Grandfathering regulations commence

Corporations Amendment Regulation 2012 (No. 8)

Explanatory Statement

28/9/12 ASIC release FOFA consultation paper relating to conflicted remuneration

Consultation Paper 189 Future of financial advice - Conflicted remuneration

ASIC's Media Release (28/9/12)

Minter Ellison Alert (5/10/12)

3/9/12 Professional indemnity insurance premiums & FOFA Australian Financial Review, "Indemnity premiums set to rise", Richard Batten comments (3/9/12)
27/8/12 Timing of FOFA reforms

Australian Financial Review, "Doubts over FOFA reform deadline" Richard Batten comments (27/9/12)

Financial Standard,"Delay FOFA reforms another year", Richard Batten comments (27/8/12)

9/8/12

 

ASIC release consultation papers containing proposed guidance on FOFA reforms – scaled advice and best interests duty

Consultation Paper 182 Future of financial advice: Best interests duty and related obligations – Update to RG 175

Consultation Paper 183 Giving information, general advice and scaled advice

Professional Planner, "Best practice: ASIC won’t expect perfection", Richard Batten comments(14/8/12)

ASIC's Media Release (9/8/12)

Money Management, "ASIC's language making industry nervous", Richard Batten comments (3/9/12)

26/7/12

Speech given by Peter Kell (Commissioner, ASIC) to the Association of Financial Advisers National Roadshow entitled 'ASIC's financial advidser work 2012-13'. The commissioner makes comments about the implementation of the FOFA reforms.

Speech: 'ASIC's financial adviser work 2012-13' (26/7/12)

20/7/12

Minister for Financial Services & Superannuation Media Release – Application of FOFA to the timeshare industry

Minister's Media Release

13/7/12

Regulations relating to ongoing fee arrangements and conflicted remuneration registered as the Corporations Amendment Regulation 2012 (No. 4)

Corporations Amendment Regulation 2012 (No. 4) 

Explanatory Statement

29/6/12

Minter Ellison makes submission to Treasury on stamping fees exemption

Minter Ellison Submission

28/6/12

ASIC updates policy on administrative action following FOFA reforms to ASIC powers

ASIC's media release (28/6/12) 

Regulatory Guide 98 Licensing: Administrative action against financial services providers 

Information Sheet 151 ASIC's approach to enforcement

27/6/12 

First and Second FOFA Acts receive Royal Assent 

Corporations (Future of Financial Advice) Act 2012 (Cth)
 
Corporations (Further Future of Financial Advice Measures) Act 2012 (Cth)

25/6/12

FOFA Bills pass House of Representatives

Minter Ellison Commentary (25/6/12)

20/6/12

FOFA Bills pass Senate with amendments

Draft Senate amendments to Corporations Amendment (Future of Financial Advice) Bill 2012 (Cth) 

Draft Senate amendments to Corporations Amendment (Further Future of Financial Advice Measures) Bill 2012 (Cth)

Minister's Media Release

Minter Ellison Commentary (20/6/12)

14/6/12

Tranche 3 of the Draft FOFA Regulations released relating to best interest duty and conflicted remuneration exemptions

Consultation Draft – Corporations Amendment Regulation 2012 (No. )

Explanatory Statement 

23/5/12

Draft FOFA Regulations released in two tranches, the first relating to ongoing fee arrangements and conflicted remuneration, and the second relating to grandfathering of conflicted remuneration

Consultation Draft – Corporations Amendment Regulation 2012 (No. ) (Ongoing fee arrangements and conflicted remuneration) 

Explanatory Statement (Ongoing fee arrangements and conflicted remuneration) 

Consultation Draft – Corporations Amendment Regulation 2012 (No. ) (Grandfathering of conflicted remuneration) 

Explanatory Statement (Grandfathering of conflicted remuneration) 

Minter Ellison Alert (28/5/12)

8/5/12

St John Report on compensation arrangements for consumers of financial services released

Richard St. John's report

Minter Ellison Alert (18/5/12)

22/3/12 

FOFA bills pass House of Representatives with amendments

Corporations Amendment (Future of Financial Advice) Bill 2012 (Cth) 

Corporations Amendment (Further Future of Financial Advice Measures) Bill 2012 (Cth) 

First Government Amendment to Corporations Amendment (Future of Financial Advice) Bill 2012 (Cth) (Sheet BG223)

Second Government Amendment 2 to Corporations Amendment (Future of Financial Advice) Bill 2012 (Cth) (Sheet ZA284) 

Government Amendment to Corporations Amendment (Further Future of Financial Advice Measures) Bill 2012 (Cth) (Sheet BG224)

Money Management Commentary (22/3/12) 

Minter Ellison Commentary (22/3/12)

15/3/12 

Consultation drafts relating to amendment of commencement date released

Exposure Draft – Corporations Amendment (Future of Financial Advice) Bill 2012 (Cth) 

Supplementary Explanatory Memorandum 

Exposure Draft – Corporations Amendment (Further Future of Financial Advice Measures) Bill 2012 (Cth)

Supplementary Explanatory Memorandum

14/3/12 

Release of the Senate Economics Committee (SEC) FOFA – Report
Smoother Transition for Financial Advice Reforms

Senate Economics Committee FOFA Report (14/3/12)

Minister's Media Release (14/3/12)

Minter Ellison Commentary (14/3/12)

29/2/12

Release of Parliamentary Joint Committee on Corporations and Financial Services FOFA Report

Parliamentary Joint Committee on Corporations and
Financial Services FOFA Report
 (29/2/12)

Minter Ellison Alert (6/3/12)

8/12/11

Federal Government announces its approach to intra-fund advice

Minister's Media release (8/12/11)

Minter Ellison Commentary (8/12/11) 

1/12/11

Richard Batten (Partner) publishes article entitled 'Formulating the Future of Advice' first published in the Financial Services Newsletter Vol 10 No. 6 2011 produced by Lexis Nexis

Article – Formulating the Future of Advice (1/12/11)

24/11/11

FOFA Tranche 2 tabled in the House of Representatives

Corporations Amendment (Further Future of Financial Advice Measures) Bill 2011

Minter Ellison Commentary (24/11/11)

Second reading speech (24/11/12)

21/10/11

Minter Ellison makes submission to Treasury on Tranche 2 of draft FOFA legislation

Minter Ellison Submission (21/10/11)

13/10/11

FOFA Tranche 1 Bill tabled in the House of Representatives – Changes made to exposure draft

Corporations Amendment (Future of Financial Advice Measures) Bill 2011 (Cth) 

Minter Ellison Alert (14/10/11)

Second reading speech (13/10/12)

28/9/11

Tranche 2 of draft FOFA legislation released

Exposure Draft – Corporations Amendment (Further Future of Financial Advice Measures) Bill 2011 (Cth)

Draft Explanatory Memorandum

Minter Ellison Alert (4/10/11)

16/9/11 

Minter Ellison makes submission to Treasury on Tranche 1 of draft FOFA legislation

Minter Ellison Submission (16/9/11)

29/8/11

Tranche 1 of draft FOFA legislation released

Exposure Draft – Corporations Amendment (Future of Financial Advice) Bill 2011 (Cth)

Draft Explanatory Memorandum 

Minter Ellison Alert (1/9/11)

28/4/11 

Australian Government released FOFA Information Pack outlining the outcome of its consultations

FOFA Information Pack (28/4/11)

Minter Ellison Alert (29/4/11)

26/4/10

Government announcement of Future of Financial Advice (FOFA) reforms

Minister's FOFA press release (26/4/10)

FOFA Information Pack (26/4/10)

 23/11/09 Parliamentary Joint Committee on Corporations and Financial Services releases report on financial products and services in Australia

PJC Committee Report (2009)

PJC Committee Media Release