Following the ban on grandfathered commissions that was legislated last year, there are more laws resulting from the royal commission recommendations that are set be consulted on and introduced to Parliament in June.
These changes include reference checking and breach reporting as well as annual renewal, disclosure of lack of independence, and a ban on advice fees being paid from MySuper accounts. They are meant to take place from 1 July.
In its submission to Treasury, the AFA has raised a number of concerns, including that the proposed new definition for a significant breach is being set at a lower level infringement, noting it will substantially increase the number of significant breaches reported to ASIC.
The association fears the lower bar will cause an immense additional workload for licensees.
Speaking at the AFA Roadshow last week, the body’s general manager of policy and professionalism Phil Anderson commented, “They are suggesting that any breach of a civil penalty provision will become a reportable breach.
“So if you failed to provide a new FSG to a client or you got your FDS two days late, then you would end up being recorded to ASIC. We suggested that this is completely wrong, licensees will be focused on the detail and the trivia, not the most important thing.”
The new breach reporting standard will also mandate licensees to report misconduct by advisers from other licensees.
The AFA added it recognises the objective of licensees reporting breaches by advisers from other licensees, but it is worried about how the process would work in practice. It also has opposed the drafted rule that failure to report is an offence.
The AFA has proposed a reporting regime for adviser conduct concerns that is outside the significant breach reporting regime.
Further, although the AFA has endorsed mandatory reference checking, it is concerned the legislation set to go before Parliament has no explanation of how it will work. The details will be included within a reference checking protocol being developed by ASIC.
The association has pushed for the reference checking legislation to be delayed until at least six months after the ASIC protocol has been finalised.
Treasury has said it will consider the feedback it has received and it will update the draft legislation prior to it landing in Parliament.
