A FEDERAL Government attempt to provide a consistent regulatory framework for Australia’s financial services sector should be in place by October 1.
A FEDERAL Government attempt to provide a consistent regulatory framework for Australia’s financial services sector should be in place by October 1.
The Financial Services Reform Bill has cleared the federal lower house and is waiting on Senate action. It appears to be on track despite rumours its introduction may be postponed.
The Bill is aimed at improving the protection of consumers’ rights
by providing proper disclosure documents to investors on the financial services products they are selling.
It also gives consumers greater recourse against financial services providers.
Those financial services areas not regulated by the Australian Secu-rities and Investments Commiss-
ion, such as banks, insurance companies and superannuation funds, will now have to apply for licensing.
Current licensing provisions only cover securities dealers, such as stock brokers and financial planners. Now, brokers for banks, insurance companies and super funds will have to seek licences.
The onus will be on their princi-pals to ensure their authority holders stick to the laws.
The proposed legislation has received a mixed reception. Some industry sectors believe it will increase their costs and workload. It may also force some practitioners to beef up their professional indemnity insurance.
Smith Coffey Insurance Brokers’ Rod Tancred said the Bill meant selling retail insurance such as house and contents to the general public may not be commercially viable.
“This could, I believe, force smaller brokers turning over around $2 million to $3 million to either leave the industry or merge with other players,” Mr Tancred said.
“There are also increased training requirements. All staff dealing with clients have to have minimum training requirements as laid down by the ASIC.
“To be fair, this will have a positive impact on the insurance industry in a lot of cases.”
Andersen Legal director of corporate and finance Alan Jessup said the Bill had the potential to significantly increase the costs and paperwork associated with providing a financial service.
“Practitioners will need to ensure they have adequate systems in place if they are to meet their obligations under the proposed Act,” he said.
“These include compliance procedures, manuals, reporting surveillance systems, supervision practices and training programs for employees. This means extra staff and resources.”
Mr Jessup said practitioners also would need to review their professional indemnity insurance because the Bill says practitioners had an “absolute obligation” to have arrangements in place to provide compensation in the event of breaches of obligation by them or their representatives.
However, financial planners are welcoming the new Bill because it makes life easier for those practitioners not already licensed.
Under legislation, a “proper authority holder” – someone who works under the authority of a licensed securities dealer – has to be a “natural” person.
The Bill makes allowances for such authority holders to be either a natural person or a corporate structure.
Financial Planning Association manager public policy Con Hristodoulidis said those association members operating under Corpora-tions Law would not feel much change.
“Securities dealers need to consider whether they want to keep going as they are or broaden their services,” Mr Hristodoulidis said.
“They will also need to check that their licence details are up to date.”
He said the Bill was putting more emphasis on compliance.
“It’s making sure key procedures and staff are in place,” Mr Hristodoulidis said.
There will be some transitional procedures in place to smooth the change for existing financial services product sellers.
Those who are already licensed will have two years to come across to the new system – and they won’t have to apply for new licences.
The Financial Services Reform Bill has cleared the federal lower house and is waiting on Senate action. It appears to be on track despite rumours its introduction may be postponed.
The Bill is aimed at improving the protection of consumers’ rights
by providing proper disclosure documents to investors on the financial services products they are selling.
It also gives consumers greater recourse against financial services providers.
Those financial services areas not regulated by the Australian Secu-rities and Investments Commiss-
ion, such as banks, insurance companies and superannuation funds, will now have to apply for licensing.
Current licensing provisions only cover securities dealers, such as stock brokers and financial planners. Now, brokers for banks, insurance companies and super funds will have to seek licences.
The onus will be on their princi-pals to ensure their authority holders stick to the laws.
The proposed legislation has received a mixed reception. Some industry sectors believe it will increase their costs and workload. It may also force some practitioners to beef up their professional indemnity insurance.
Smith Coffey Insurance Brokers’ Rod Tancred said the Bill meant selling retail insurance such as house and contents to the general public may not be commercially viable.
“This could, I believe, force smaller brokers turning over around $2 million to $3 million to either leave the industry or merge with other players,” Mr Tancred said.
“There are also increased training requirements. All staff dealing with clients have to have minimum training requirements as laid down by the ASIC.
“To be fair, this will have a positive impact on the insurance industry in a lot of cases.”
Andersen Legal director of corporate and finance Alan Jessup said the Bill had the potential to significantly increase the costs and paperwork associated with providing a financial service.
“Practitioners will need to ensure they have adequate systems in place if they are to meet their obligations under the proposed Act,” he said.
“These include compliance procedures, manuals, reporting surveillance systems, supervision practices and training programs for employees. This means extra staff and resources.”
Mr Jessup said practitioners also would need to review their professional indemnity insurance because the Bill says practitioners had an “absolute obligation” to have arrangements in place to provide compensation in the event of breaches of obligation by them or their representatives.
However, financial planners are welcoming the new Bill because it makes life easier for those practitioners not already licensed.
Under legislation, a “proper authority holder” – someone who works under the authority of a licensed securities dealer – has to be a “natural” person.
The Bill makes allowances for such authority holders to be either a natural person or a corporate structure.
Financial Planning Association manager public policy Con Hristodoulidis said those association members operating under Corpora-tions Law would not feel much change.
“Securities dealers need to consider whether they want to keep going as they are or broaden their services,” Mr Hristodoulidis said.
“They will also need to check that their licence details are up to date.”
He said the Bill was putting more emphasis on compliance.
“It’s making sure key procedures and staff are in place,” Mr Hristodoulidis said.
There will be some transitional procedures in place to smooth the change for existing financial services product sellers.
Those who are already licensed will have two years to come across to the new system – and they won’t have to apply for new licences.
