The federal government has announced stamping fees relating to listed investment companies (LIC) and listed investment trusts (LIT) will be banned from 1 July 2020.
Stamping fees are once-only commissions payable to LIC and LIT managers for the role they play in capital raisings associated with initial public offerings of shares.
Until now, LICs and LITs have been exempt from the abolition of upfront commissions that have applied to other financial services product providers.
According to Treasurer Josh Frydenberg, the banning of these fees will improve consumer protection and clarify the regulatory framework regarding these types of investments for stockbrokers, financial advisers and fund managers.
“Extending the ban on conflicted remuneration to LICs will address risks associated with the potential mis-selling of these products to retail consumers, improve competitive neutrality in the funds management industry and provide long-term certainty so that this segment of Australia’s capital markets can continue to operate effectively and provide investors with opportunities to diversify their investments,” Frydenberg said.
The Treasurer specified the ban did not apply to real estate investment trusts or equity and debt securities in trading companies, including hybrid products.
“Maintaining the existing treatment for these investments is designed to ensure that direct capital-raising activities, which support the economic activity of companies in the real economy, are not impacted by these changes,” he said.
The Listed Investment Companies and Trusts Association (LICAT) acknowledged the government’s decision and said its members would make the necessary changes to comply with the legislative amendment.
“Our industry will now consider the adjustments required to ensure a smooth transition to the new law to ensure that there is no disruption to the quality and integrity of the capital-raising process for closed-ended listed investment vehicles, which continue to play an integral role in supporting Australian investors, businesses and the overall economy,” LICAT said.
The organisation called on parliament to consider other service provider costs of preparing for a capital raising, including arranger/manager fees, when drafting the legislative change to make sure they are not unintentionally prohibited.
The Financial Planning Association (FPA) applauded the government’s decision on stamping fees and recommended parliament now address another pressing matter at its next sitting.
“We welcome the exemption as it ensures Australians continue to invest with confidence in LICs and LITs,” FPA chief executive Dante De Gori said.
“This announcement also removes any impediment to passing the much-needed Treasury Laws Amendment (2019 Measures No 3) Bill 2019, which will grant financial planners an extension to complete new education requirements. Our members are calling on the Senate to pass the bill at the next parliamentary sitting on 10 June.”
