The Senate Economics Legislation Committee released its report on the FOFA amendments late on Monday night.
The report made two key recommendations – the first being that the explanatory memorandum (EM) of the bill “clearly and unambiguously spell out the best interest obligations”.
Second, the committee recommended the provisions governing conflicted remuneration be redrafted – with particular consideration given to the terminology used in the EM and the legislation such as ‘information’, ‘general advice’ and ‘personal advice’.
But according to Henry Davis York partner Jon Ireland, redefining the terms ‘general advice’ and ‘personal advice’ in the Corporations Act could have broader implications beyond conflicted remuneration.
“Any changes to how those terms work in the Corporations Act could potentially have ramifications much more broadly than the advice space, and could impact participants right across the financial services sector,” said Mr Ireland.
“Those definitions for general advice and personal advice support much broader regulatory requirements in relation to licensing and disclosure. It’s not just about conflicted remuneration,” he said.
Both general advice and personal advice are the subject of very detailed ASIC regulatory guides, added Mr Ireland.
“It’s not as if these terms are without regulatory interpretation at this point in time,” he said.
As a result, the government should consider taking a “dual approach” to the FOFA amendments, said Mr Ireland.
“If there is an appetite for taking up a broader approach with the [Senate committee] recommendations, my feeling is they’ll need to take those off on a separate stream and deal with the FOFA changes first,” he said.
“Making changes to the definitions of factual information, general advice and personal advice cannot be done just under the remit of getting the FOFA amendments through.”
