Senate

Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014

Corporations Amendment (Financial Advice Measures) Act 2016

Revised Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon J. B. Hockey MP)
This Memorandum takes account of amendments made by the House of Representatives to the bill as introduced and recommendations made by the Senate Economics Legislation Committee report of 16 June 2014.

[1]
ToonenaAustralia , CCPR/C/50/D/488/1992, UN Human Rights Committee (HRC), 4 April 1994.

[1]
This RIS was published on 19 March 2014 at http://ris.dpmc.gov.au/2014/03/19/future-of-financial-advice-amendments-details-stage-regulation-impact-statement-department-of-the-treasury/

[2]
Corporations Amendment (Future of Financial Advice) Bill 2011 and the Corporations Amendment (Further Future of Financial Advice Measures) Bill 2011.

[3]
ABS - 5204.0 - Australian System of National Accounts, 2012-13.

[4]
ABS - 5206.0 - Australian National Accounts: National Income, Expenditure and Product, June 2013.

[5]
ASIC Report 224: Access to financial advice in Australia, 2010, p30.

[6]
ASIC Report 224: Access to financial advice in Australia, 2010, p30.

[7]
IBISWorld Industry Report K6419b Financial planning and investment advice in Australia, August 2013.

[8]
ASIC Report 224: Access to financial advice in Australia, 2010, p14.

[9]
IBISWorld Industry Report K6419b Financial planning and investment advice in Australia, August 2013.

[10]
ASIC Report 362: Review of financial advice industry practice: Phase 2 , 2013, p7.

[11]
IBISWorld Industry Report K6419b Financial planning and investment advice in Australia, August 2013 .

[12]
IBISWorld Industry Report K6419b Financial planning and investment advice in Australia, August 2013 .

[13]
AMP Investor Report: Full Year 2013 , AMP, 2014, available from: http://shareholdercentre.amp.com.au/ p27, 39. This is the impact of FOFA as well as other regulatory changes, including the Stronger Super reforms.

[14]
Annual Report 2013 , Commonwealth Bank, 2013, available from: https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/annual-reports/2013_CBA_Annual_Report_19_August_2013.pdf, p15.

[15]
IBISWorld Industry Report K6419b Financial planning and investment advice in Australia, August 2013 .

[16]
ASIC Report 362: Review of financial advice industry practice: Phase 2 , 2013, p13.

[17]
ASIC Report 362: Review of financial advice industry practice: Phase 2 , 2013, p27.

[18]
ASIC Report 362: Review of financial advice industry practice: Phase 2 , 2013, p28.

[19]
Section 961B(2)(e) of the Corporations Act 2001 (Cth).

[20]
Regulatory Guide 79: Research report providers: Improving the quality of investment research , ASIC, December 2012, available from: http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rg79-published-10-December-2012.pdf/$file/rg79-published-10-December-2012.pdf, p1.

[21]
ASIC Report 251: Review of financial advice industry practice , 2011, p7.

[22]
ASIC Report 362: Review of financial advice industry practice: Phase 2 , 2013, p13.

[23]
Annual Review 2011 , NAB, 2011, available from: http://cr.nab.com.au/docs/2011annualreview.pdf, p20.

[24]
ASIC Report 251: Review of financial advice industry practice , 2011, p11.

[25]
ASIC Report 251: Review of financial advice industry practice , 2011, p11.

[26]
ASIC Report 251: Review of financial advice industry practice , 2011, p12.

[27]
ASIC Report 362: Review of financial advice industry practice: Phase 2 , 2013, p13.

[28]
Kate Kachor, 'AMP rules out commissions revival', Financial Observor , 21 February 2014 (online), available from: http://www.financialobserver.com.au/articles/amp-rules-out-commissions-revival.

[29]
ASIC Report 224: Access to financial advice in Australia , 2010, p43.

[30]
ASIC Report 224: Access to financial advice in Australia , 2010, p42.

[31]
ASIC Report 224: Access to financial advice in Australia , 2010, p44.

[32]
ASIC Report 224: Access to financial advice in Australia , 2010, p44.

[33]
IBISWorld Industry Report K6419b Financial planning and investment advice in Australia, August 2013 .

[34]
PJC Inquiry into financial products and services in Australia, November 2009, p150.

[35]
Dissenting Report, February 2012, p151.

[36]
Dissenting Report, February 2012, p151.

[37]
The cost estimate was indicated to be $375 million by Mr John Brogden, CEO of the Financial Services Council, during PJC hearings.

[38]
Dissenting Report, February 2012, p152-153.

[39]
Dissenting Report, February 2012, p154.

[40]
Dissenting Report, February 2012, p155.

[41]
Dissenting Report, February 2012, p156.

[42]
Much of the evidence in this RIS has been provided to the Treasury under commercial-in-confidence arrangements and cannot be directly quoted. Where this is the case, the evidence is paraphrased and no source is referenced.

[43]
Australia to 2050: future challenges , the Treasury, 2010, available from: http://archive.treasury.gov.au/igr/igr2010/report/pdf/IGR_2010.pdf, p1.

[44]
Mid - year Economic and Fiscal Outlook 2013 - 14 , Commonwealth of Australia, December 2013, available from: http://budget.gov.au/2013-14/content/myefo/download/2013_14_MYEFO.pdf, p2.

[45]
The Coalition's Policy to Boost Productivity and Reduce Regulation, July 2013, p26.

[46]
The Coalition's Policy to Boost Productivity and Reduce Regulation, July 2013, p26.

[47]
Assistant Treasurer, Keynote Address to the 2014 Insurance Council of Australia Regulatory Update Seminar, 28 February 2014, available from: http://axs.ministers.treasury.gov.au/speech/008-2014/.

[48]
Mr John Brogden, CEO of the Financial Services Council, during PJC hearings.

[49]
The cost savings for this amendment differ from the savings published in the options-stage RIS as the general advice exemption has been modified (see detailed analysis for further explanation). It is estimated that the modifications will affect some of the firms in the small and medium firm segments but none of the large firms.

[50]
Business Cost Calculator , the Office of Best Practice Regulation in the Department of the Prime Minister and Cabinet, available from: https://bcc.obpr.gov.au/.

[51]
The total cost savings figures for the fee disclosure statement and opt-in amendments differ from the cost savings estimates provided in Table 6.3 of the RIS. The figures presented in this table represent the savings achieved in the first year of the amendments, whereas the figures presented in Table 6.3 are average cost savings over ten years (presented as an average to comply with OBPR guidelines). atonl;The savings from the fee disclosure amendment is expected to decrease over time whereas the saving in relation to the opt-in amendment is expected to increase over time.
Cost savings for the remaining three amendments are not expected to change over time, so are identical to the figures in Table 6.3.

[52]
Number of hours per firm (per week) have been rounded to one decimal point.

[53]
Average labour cost (per hour) have been rounded to one decimal point.

[54]
Total labour cost savings have been rounded to the nearest $100,000.

[55]
Total purchase cost savings have been rounded to the nearest $100,000.

[56]
Total cost savings have been rounded to the nearest $100,000.

[57]
ASIC Report 251: Review of financial advice industry practice , 2011.

[58]
Dissenting Report, February 2012, p160-161.

[59]
Dissenting Report, February 2012, p160-161.

[60]
Dissenting Report, February 2012, p165.

[61]
Dissenting Report, February 2012, p163.

[62]
Dissenting Report, February 2012, p163.

[63]
ASIC Regulatory Guide 175: Licensing: Financial product advisers-conduct and disclosure, October 2013, available from: http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rg175-published-3-October-2013.pdf/$file/rg175-published-3-October-2013.pdf, RG 175.238-175.249 .

[64]
Dissenting Report, February 2012, p166.

[65]
Dissenting Report, February 2012, p168.

[66]
Dissenting Report, February 2012, p168.

[67]
Section 766B of the Corporations Act 2001 (Cth).

[68]
In accordance with OBPR methodology, this figure includes both the average annual ongoing cost savings (of $189.7m) as well as the one-off implementation cost savings (of $87.7m). For this purpose, the implementation costs savings have been annualised over a

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