Explanatory Memorandum
(Circulated by authority of the Minister for Housing and Assistant Treasurer, the Hon Michael Sukkar MP)Chapter 2 Deferring education and training standards for existing financial advisers
Outline of chapter
2.1 Schedule 2 to the Bill amends the Corporations Act to defer the transitional timeframes for existing providers to comply with the education and training standards requiring completion of an approved degree or equivalent qualification (by two years) and an approved exam (by one year).
Context of amendments
2.2 The Corporations Amendment (Professional Standards of Financial Advisers) Act 2017 amended the Corporations Act to raise the education and training standards of financial advisers that provide personal advice to retail clients in relation to relevant financial products. These advisers are referred to by the legislation as relevant providers.
2.3 These standards require an individual, among other things, to hold an approved degree (or a higher or equivalent qualification) and to pass an approved exam in order to be a relevant provider. These standards started applying to new relevant providers from 1 January 2019. Transitional provisions provide an extended timeframe for existing providers to meet these standards.
2.4 An existing provider is an individual that was a relevant provider between 1 January 2016 and 1 January 2019, and was not prohibited from providing personal advice to retail clients in relation to relevant financial products on 1 January 2019.
2.5 Existing providers are currently required to hold an approved degree or an equivalent qualification (such as a bridging course) by 1 January 2024, and to pass an approved exam by 1 January 2021.
2.6 Until September 2019, the approved exam was only available in capital cities. Accordingly, the timeframe for completing the exam will be extended to ensure that all existing advisers, including rural and regional advisers, will have at least two years to sit the exam.
2.7 The timeframe for completing the approved degree or equivalent qualification will also be extended for existing providers. This will assist working parents, including those taking parental leave during the transition period, to have sufficient time to meet the requirements, maintaining a diverse adviser industry.
Summary of new law
2.8 Schedule 2 to the Bill amends the transitional provisions in Part 10.23A of the Corporations Act to defer the date by which existing providers are required to hold an approved degree (or equivalent qualification) by two years to 1 January 2026, and the date by which the approved exam must be passed by one year to 1 January 2022.
Comparison of key features of new law and current law
| New law | Current law |
| Existing providers must hold an approved degree or equivalent qualification by 1 January 2026. | Existing providers must hold an approved degree or equivalent qualification by 1 January 2024. |
| Existing providers must pass an approved exam by 1 January 2022. | Existing providers must pass an approved exam by 1 January 2021. |
Detailed explanation of new law
2.9 Section 921B of the Corporations Act sets out the education and training standards that must be met in order to be a relevant provider. Section 1546B of that Act sets out transitional arrangements, including timeframes, for existing providers to meet these or equivalent standards.
2.10 Schedule 2 to the Bill extends the timeframes for existing providers to hold an approved degree or an equivalent qualification by two years to 1 January 2026, and to pass an approved exam by one year to 1 January 2022. [Schedule 2, items 1 and 2, subsections 1546B(1) and (3) of the Corporations Act]
2.11 If an existing provider does not meet either of those extended dates, the individual will cease to be a relevant provider on that date. The requirements set out in section 921C of the Corporations Act will also start to apply in relation to that individual after that date. [Schedule 2, items 3 to 6, subsections 1546B(4) and (5) and 1546C(2) and (3) of the Corporations Act]
2.12 Section 921C of the Corporations Act applies obligations on certain persons, such as financial services licensees and their authorised representatives, directed toward ensuring that individual does not become a relevant provider until they have met the education and training standards. Where an existing provider has failed to meet either of the extended timeframes set out in section 1546B of that Act, all of the transitional arrangements for existing providers in that section will cease to apply to that individual. This means that the individual would need to meet the standards set out in section 921B of that Act, rather than those in section 1546B, before they again become a relevant provider.
Application and transitional provisions
2.13 The amendments in Schedule 2 will commence on the day after the Bill receives the Royal Assent. [Subclause 2(1), table item 7]