Revised Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon J. B. Hockey MP)Chapter 5 Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Corporations Amendment (Streamlining of Future of Advice) Bill 2014
5.1 This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
5.2 This Bill fulfils an election commitment made by the Government to reduce the regulatory overreach of the Future of Financial Advice (FOFA) legislation.
5.3 The original FOFA legislation, which was passed by Parliament in June 2012, was introduced to increase trust and confidence in the financial services industry and increase access to financial advice for retail investors. FOFA made a number of changes to financial advice laws, including removing conflicted remuneration structures, and introducing measures to improve the quality of advice and enhance retail investor protections. The legislation applied voluntarily from 1 July 2012, and was mandatory from 1 July 2013.
5.4 The Government believes that the FOFA legislation went too far and imposed unnecessary red tape and costs on industry, which has pushed up the price of financial advice for consumers and is contrary to the initial goals of FOFA. The Government considers that the legislation has also had a number of unintended consequences that have led to uncertainty in the industry. This Bill fulfils the Government's election commitment to unwind the regulatory overreach created by the FOFA legislation and provide certainty to the financial services industry.
Human rights implications
5.5 The impact of this Bill on the following human rights has been considered:
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- the right to privacy and reputation;
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- the right to freedom of opinion and expression; and
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- the right to work and rights in work.
Right to privacy and reputation
5.6 Article 17 of the International Covenant on Civil and Political Rights (ICCPR) provides that no one shall be subjected to arbitrary or unlawful interference with their privacy. The right to privacy may be engaged if the Bill involves the collection, security, use, disclosure or publication of personal information.
5.7 This Bill removes the need for financial advisers to mail out an annual fee disclosure statement to clients who entered into their ongoing fee arrangement prior to 1 July 2013. A fee disclosure statement is document that will typically contain the client's name, address, account number and account details; at least some of which is personal to the client.
5.8 This Bill also removes the need for financial advisers to obtain client agreement to continue an ongoing fee arrangement every two years. To obtain client agreement, an adviser would typically be required to mail out a form for the client to complete. This form would also contain some personal details of the client.
5.9 This Bill could therefore engage the right to privacy as it deals with the disclosure of personal information. However, the Bill does not limit the right to privacy in any way. The information that would be contained in these documents will still be available to the client either through other documents they receive or upon request.
5.10 In addition, the risk of this information being intercepted in the mail is eliminated by this amendment. To the extent that this increases the security of personal information, this may advance the right to privacy for the affected clients. However, on balance, the Bill does not engage the right to privacy and reputation.
The right to freedom of opinion and expression
5.11 The right to freedom of opinion and expression is contained in articles 19 and 20 of the ICCPR. The right to freedom of opinion and expression may be engaged if the Bill deals with aspects of employment or workplace relations.
5.12 As described above, this Bill removes the need for advisers to send fee disclosure statements to pre-1 July 2013 clients. These statements contain information about the client and their account. As a result, the right to freedom of opinion and expression could be engaged because it regulates the clients' access to this information. The information that is being regulated, however, is still available to the client through other means so the right to freedom of opinion and expression is not limited.
5.13 This Bill extends the time for fee disclosure statements from 30 to 60 days after the client's anniversary date. These statements contain information about fees charged to the client and the services they received in the previous 12 months. As a result, the right to freedom of opinion and expression is engaged because it regulates the clients' access to this information. The information that is being regulated, however, is still available to the client, albeit 30 days later.
5.14 The changes to the Statement of Advice requirements contained in this Bill increase access to information for consumers by providing additional disclosure on a consumer's rights and an advice provider's obligations.
5.15 On balance, the right to freedom of opinion and expression is not engaged.
The right to work and rights in work
5.16 The right to work and rights in work is contained in articles 6(1), 7 and 8(1)(a) of the International Covenant on Economic, Social and Cultural Rights. The right to work and rights in work may be engaged if the Bill deals with aspects of employment or workplace relations.
5.17 This Bill increases the number of avenues through which certain employees in the financial services industry can earn benefits. As this relates to remuneration, which is an aspect of employment, it may engage certain rights in work. That said, it certainly does not limit the rights of employees; rights in work are advanced to the extent that certain employees can earn a living through additional income streams. However, on balance, the right to work and rights in work are not engaged.
Conclusion
5.18 This Bill is compatible with human rights as it does not raise any human rights issues.