By Hiroshi Narushima, Jessica van Rooy and Peter Reeves
Welcome to the latest update from Gilbert + Tobin's Corporate Advisory team.
This month's update includes:
- Legislation and proposed legislation
- Future of Financial Advice laws amendments now in force
- Going the “full Harper” – Big changes to section 46 announced
- A mandatory data breach notification scheme for Australia?
Legislation and proposed legislation
Government consults on draft client money reforms
The Government’s proposed reforms aim to deliver on its commitment to better protect client money by offering greater protection for retail clients of financial services providers, whilst still facilitating the ongoing efficiency of the wholesale derivatives market.
Following the release in December 2015 of the Government’s Policy Paper - Enhanced Protection of Client Money, the Government has now released exposure draft legislation to reform the Australian regulatory framework governing how financial services providers must deal with certain property and money that they receive from clients (contained in Divisions 2 and 3 of Part 7.8 of the Corporations Act 2001 (Cth) and Regulations 7.8.01 to 7.8.07 of the Corporations Regulations 2001 (Cth)).
The reforms proposed under the exposure draft Corporations Amendment (Client Money) Bill 2016 and the exposure draft Corporations Amendment (Client Money) Regulation 2016 give effect to the proposals made in the Policy Paper and:
- offer greater protection to retail clients by requiring financial services providers to hold all derivative retail client money and property in trust, and only use it to meet obligations incurred by the provider in connection with dealings in the derivative where the obligation is incurred under market integrity rules or the operating rules of a licensed market or clearing and settlement facility; and
- facilitate the ongoing efficiency of the wholesale derivatives market and ensure that the regime does not impose unnecessary limitations on institutional investors by allowing wholesale clients to contract out of the client money regime if they wish to.
The Government has also stated that the proposed changes will better align the Australian client money regime with international best practice and community expectations of consumer protection.
Submissions on the exposure draft legislation closed on 25 March 2016.
See the Explanatory Memorandum and Explanatory Statement for further information.
See also media release dated 29 February 2016.
Future of Financial Advice laws amendments now in force
The Act to amend the Future of Financial Advice laws has now received Royal Assent. The amendments are aimed at improving the advice provided to consumers and alleviating the unintended consequences since the laws were introduced.
The Corporations Amendment (Financial Advice Measures) Act 2016 (Cth) (Act), which incorporates amendments to the Bill which were passed by the Senate in November last year, received Royal Assent on 18 March 2016. The Senate amendments removed many of the changes in the Bill originally passed by the House of Representatives in August 2014 which were aimed at streamlining and limiting the operation of Future of Financial Advice laws in Part 7.7A of the Corporations Act 2001 (Cth), and made other minor and technical amendments.
In summary, the key changes implemented by the Act include:
- extending the time frame for opt-in notices and fee disclosure statements to be received by a client from 30 days to 60 days after the client’s renewal notice day or disclosure day;
- treating basic insurance products and non-cash payments (such as travel money cards) consistently with other simple financial products;
- ensuring that the existing client-pays and intra-fund advice provisions operate as intended;
- broadening the ‘education and training’ provision to include education and training that relates to the carrying on of a financial services business; and
- providing that the Regulations may prescribe circumstances in which all or part of a benefit is to be treated as conflicted remuneration (to address any future unintended consequences in relation to the conflicted remuneration provisions).
See media release dated 2 March 2016.
The Takeovers Panel has also announced amendments to Guidance Note 13 Broker Handling Fees which reflect that broker handling fees appear to fall under “conflicted remuneration” following the passage of the Act.
See also the Panel’s media release dated 9 March 2016.
Going the “full Harper” – Big changes to section 46 announced
Noting the importance of both competition and small business to the economy, the Government has announced that it would move to implement the Harper Review’s recommendation to replace the current section 46 of the Competition and Consumer Act 2010 with a new provision that would add an “effects” test, remove the requirement to show that a business had of its market power, and adopt the found in some other sections of the Act.
See Going the “full Harper” – Big changes to section 46 announced dated 16 March 2016 by Luke Woodward, Gina Cass-Gottlieb and Matt Rubinstein for further details.
A mandatory data breach notification scheme for Australia?
The Australian Government’s consultation paper as to the Privacy Amendment (Notification of Serious Data Breaches) Bill 2015 notes that the proposed “relatively higher notification threshold” is intended to “help avoid the risk of individuals experiencing ‘notification fatigue’ and will also help avoid unnecessary administrative costs for business”.