The federal government will scrap the Financial Adviser Standards and Ethics Authority (FASEA) and give responsibility for its major functions to Treasury and the Australian Securities and Investments Commission (ASIC).
The move was made public by Assistant Minister for Financial Services Senator Jane Hume as part of a wider announcement regarding changes to financial services advice stemming from the financial services royal commission.
Hume, in conjunction with Treasurer Josh Frydenberg, said recommendation 2.10 of the royal commission called for a single disciplinary body for the oversight of financial advisers.
“The government will give effect to this recommendation by expanding the operation of the Financial Services and Credit Panel (FSCP) within ASIC,” they said.
“The FSCP currently supports ASIC in the exercise of its regulatory functions with respect to the making of banning orders against individuals for misconduct.”
Hume said the expanded role of the FSCP would be built on its expertise and existing governance structures, removing the need to set up a new disciplinary body to oversee the activity of advisers.
She added the standard-making functions of FASEA would move to Treasury, with the standards to be set by legislative instrument, and the administration of the adviser examination would fall under the FSCP’s expanded role.
“These reforms will further streamline the number of bodies involved in the oversight of financial advisers, resulting in FASEA being wound up,” she said in the statement.
The consolidation of functions within ASIC would also reduce regulatory overlap and the possibility of multiple investigations by multiple agencies into the same advice-related conduct, she added.
Legislation to enable the transition of functions will be introduced into parliament in the first half of 2021 and Hume and Frydenberg said the government acknowledged the “important contribution made by the board and staff of FASEA towards improving the education, training and ethical standards in the financial advice sector”.
Plans to create a single disciplinary body were announced in late 2019, scuppering efforts by the advice sector to establish code-monitoring bodies that would enforce the FASEA Code of Ethics.
In October, Hume said legislation for the new body would be released in mid-2021.
In related news, the government has also introduced legislation into parliament that will effectively merge the fee disclosure statement (FDS) and renewal or opt-in notice into a single document.
The changes are part of the Financial Sector Reform (Hayne Royal Commission Response No 2) Bill 2020 and follow recommendations from the royal commission that the ongoing fee arrangements be strengthened and simplified to minimise the risk of fee-for-no-service conduct, and disclosure requirements be amended to ensure advisers disclose whether they are independent.
Commenting on the new legislation, the Association of Financial Advisers noted the FDS would be expanded to include fees and services for the last year, as well as those to be paid in the following year, and must be issued within 60 days of the anniversary day.
Following this, the renewal period, following the anniversary day, would be a period of 120 days and where a client did not provide consent within that time frame, fees should be turned off within a further 30 days.
The legislation, which has been introduced into the House of Representatives, is due to commence on 1 July 2021, with a 12-month transition period, and will be debated for the first time when parliament resumes in 2021.
