Legislation creating a single disciplinary body and transferring the work of the Financial Adviser Standards and Ethics Authority (FASEA) to the government has passed through parliament, but concerns remain around its implementation.
The Financial Sector Reform (Hayne Royal Commission Response – Better Advice) Bill 2021 (Better Advice Bill) was passed on 21 October and will implement recommendation 2.10 of the Hayne royal commission, which proposed a government-run disciplinary body.
The government adopted this approach in October 2019, ending plans by the industry to self-regulate, and from 1 January 2022 the Financial Services and Credit Panel (FSCP) within the Australian Securities and Investments Commission (ASIC) will take on that role and handle complaints about compliance with the financial services laws and the Code of Ethics.
The passing of the bill was welcomed by the Association of Financial Advisers (AFA) and Financial Planning Association (FPA), with both noting it would create more stability in the advice sector after years of changing regulation and legislation.
“The bill is the last major recommendation from the Hayne royal commission related to the provision of financial advice. The past two years has been another period of significant reform that has overhauled the regulation and practice of financial advice in Australia,” FPA chief executive Dante De Gori said.
“Whilst this legislation now provides a level of clarity as to who regulates financial planners, there are still outstanding issues that need to be addressed through regulations.”
AFA policy and professionalism general manager Phil Anderson said the establishment of the single disciplinary body was welcomed, but the association was concerned about what the FSCP would review and at what cost to the advice sector.
“We are concerned about ASIC being required to investigate minor breaches of the law, even if they do not choose to refer them to a Financial Services and Credit Panel,” Anderson said.
“This will add unnecessarily to the cost of running the single disciplinary body, which ultimately financial advisers and their clients will need to pay for.”
The legislation also transfers the functions of FASEA to ASIC, which will deliver financial adviser exams, and to Treasury, which will oversee the development and implementation of education and professional standards.
The legislation also gives the government the ability to extend the cut‑off date for certain existing financial advisers to pass the mandatory exam and it has indicated it will do so with an extension to 30 September 2022 for advisers who have attempted the exam twice before 1 January 2022.
Both associations stated they were broadly supportive of draft regulations that have accompanied the legislation, but questions remained around the removal of the need for financial advisers who provide tax advice to be also registered under the Tax Practitioners Board.
Anderson said the AFA will be calling for amendments to address its concerns and for the changes to be part of the Quality of Advice Review that will take place in 2022.
