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Monday 4 March 2013

13-038MR ASIC releases guidance on conflicted remuneration ban

ASIC has finalised guidance to help industry understand the practical operation of the ban on conflicted remuneration and how ASIC will administer it.

The ban on conflicted remuneration is part of the Future of Financial Advice (FOFA) reforms, and applies to both personal and general advice given to retail clients about any financial product, including managed investments, superannuation and platforms. The ban applies to commissions, volume-based payments, soft dollar benefits and volume-based shelf space fees.

Regulatory Guide 246 Conflicted remuneration (RG 246) covers:

  • volume-based benefits

  • performance benefits for employees

  • volume-based shelf space fees

  • asset based fees on borrowed amounts

  • transitional provisions

  • the anti avoidance provision

RG 246 follows consultations throughout last year, including a consultation paper released in September 2012 (refer: 12-243MR).

As previously announced, our final guidance on performance benefits as part of employee remuneration focuses on the principles underlying when a performance benefit is more likely to be conflicted remuneration (refer: 12-317MR). This change was made following feedback on our draft guidance, which had included indicative thresholds as to when ASIC would be more likely to scrutinise such a benefit.

ASIC Commissioner Peter Kell said: ‘The key principle underlying the conflicted remuneration ban is to ensure the interests of advisers and retail clients are more closely aligned, improving the quality of advice provided.

‘Complying with this ban means payment structures used in some business models or delivery channels will need to change. We will continue to work with industry as they implement these changes.’

Background

The conflicted remuneration provisions are set out in Divisions 4 and 5 of Part 7.7A of the Corporations Act 2001 and commence on 1 July 2013. Australian financial services licensees can choose to comply with these provisions and other FOFA reforms earlier. If they do so, they must register with ASIC.

Further information on ASIC’s implementation of the FOFA reforms is available on ASIC’s FOFA webpage.


Download

  • Regulatory Guide 246 Conflicted remuneration (RG 246)

  • Report 328 Response to submissions on CP 189 Future of Financial Advice: Conflicted remuneration (REP 328)

  • Submissions to CP 189

Last updated: 04/03/2013 12:00