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What is the state of play with FOFA, Palmer and Government?

As of 21 August 2014:

The short answer is that the Government’s Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014 (the “Regulations”) currently stand, with the support of the Palmer United Party (“PUP”).

The Regulations (which commenced on 1 July 2014) wound back some of the previous Government’s changes, including by:

  • amending exemptions/ introducing new exemptions (from prohibitions on a licensee/ representative that gives advice to retail clients from accepting and giving conflicted and other banned forms of remuneration in Divs 4 and 5 of Pt 7.7A Corporations Act 2001 (Cth)), for example:
    • the general advice exemption is amended to operate for any individual representative (not limited to employees) giving general advice under the name of the licensee (Reg 7.7A.12FA), where:
          • the benefit is not a commission – defined as a recurring payment or a payment made solely because a product is issued or sold;
          • no personal advice is given (except in relation to banking, general insurance or consumer credit insurance); and
          • the product is issued or sold by the licensee or a related company or another entity under the licensee’s name – ie it is a badged product; and
    • there is a new performance bonus exemption for individuals (applying to representatives of all licensees, including individual authorised representatives) (Reg 7.7A.12EB), where:
          • the benefit is low in proportion to the individual’s total remuneration – “a benefit is likely to be considered low if it comprises less than 10 per cent of the employee’s total remuneration” according to the Explanatory Memorandum; and
          • the conflicted measure is “outweighed or balanced by” the other measures; and
  • amending the best interests duty and related obligations when providing personal advice to retail clients, including by:
    • allowing advisers not to prove the last catch-all step of the best interests duty safe harbour in relation to advice given before 1 January 2016 (Reg 7.7A.3) (note: the date is only for the purposes of regulation-making, and the Government has announced that its Bill will make these changes); and
    • broadening the modified/ reduced best interests duty (where only the first 3 steps of the best interests duty safe harbour are required) for basic banking products to non-cash payment facilities generally and to general and consumer credit insurance (Reg 7.7A.4 and 6).


The Government has also tabled a bill (the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 – the “Bill”) in Parliament on 19 March 2014. The Bill has not been passed and therefore is not yet law.

To come shortly

There will be new/ amended regulations by mid October 2014, and amendments to the Bill.

In order to secure PUP support, the Government (through the Minister for Finance) informed Parliament on 15 July 2014 that agreement has been reached with PUP, and tabled a letter to Palmer.

In the letter, the Minister stated that “the Government will make further regulations within 90 days” and “reflect those changes, as required, in amendments” to the Bill:

  • to ensure the following requirements in the Corporations Act 2001 are explicitly listed in the Statement of Advice, that:
    • the adviser is required to act in the best interest of their client and prioritise their client’s interests ahead of their own, consistent with the requirements in subsection 961B and 961J of the Corporations Act 2001;
    • any fees be disclosed and that the adviser will provide a fee disclosure statement annually, if the client enters into, or has entered into, an ongoing fee arrangement after 1 July 2013;
    • a client has the right to return financial products under a 14-day cooling-off period in accordance with the requirements currently provided under Division 5 of Part 7.9 of the Corporations Act 2001; and
    • the client has the right to change his or her instructions to their adviser, if for example they experience a change in their circumstances.
  • to require that:
    • any instructions to alter or review instructions must be in writing, signed by the client, and acknowledged by the adviser;
    • the Statement of Advice has an explicit statement that the financial adviser genuinely believes that the advice provided to the client is in the client’s best interests, given the client’s relevant circumstances;
    • the Statement of Advice is to be signed by both the adviser and the client.


The Minister also stated that the Government will work with stakeholders to establish a public register of financial advisers (including employee advisers), which includes a record of each adviser’s credentials and status in the industry.

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