In January, Treasury commenced a consultation into the merits of stamping fees, an upfront one-off commission paid to financial services licensees for their role in capital raising associated with initial public offerings for newly listed investment trusts (LITs) and LICs.
Following the review, the government has indicated it will ban conflicted remuneration including stamping fees, with the changes to take effect from 1 July. ASIC will be monitoring arrangements in the lead up to and following the introduction of the reform.
While new LIC capital raisings have largely ceased since the inception of COVID-19, a statement from Treasurer Josh Frydenberg stated it is important that the ban on conflicted remuneration is extended ahead of any resumption of capital raising activity.
“Clarifying these arrangements will address any related risk of consumer harm and ensure that stockbrokers, financial advisers and investment managers are clear about the regulatory settings that will apply in this area and investors can continue to invest with confidence in these products,” Mr Frydenberg said.
“Extending the ban on conflicted remuneration to LICs will address risks associated with the potential mis-selling of these products to retail consumers, improve competitive neutrality in the funds management industry and provide long-term certainty so that this segment of Australia’s capital markets can continue to operate effectively and provide investors with opportunities to diversify their investments.”
The treatment of equity and debt securities in trading companies (including hybrids), real estate investment trusts (REITs) and listed infrastructure investments will not be impacted by the changes. The government stated maintaining the investments’ existing treatment will ensure that direct capital raisings “which support the economic activity of companies in the real economy are not impacted by these changes”.
A person providing personal advice to a retail client in relation to the products will continue to be legally required to act in that client’s best interests.
Wish ASIC would look at some of the crap that goes on in the small cap space, from company directors. It’s still ok to do a capital raising and for the consulting company doing the raising getting 6% commission, related party loans, directors issuing shares to themselves, exorbitant director fees & salary, pump and dump schemes, misleading investors. It’s the wild west and mums and dads are constantly fleeced. But god forbid an adviser doesn’t hand out a FSG.
Good move. That should keep the opposition happy and pass the FASEA extension
Don’t be surprised if they invent some new demand out of thin air, such as getting rid of the early access to super from July to protect their Industry Super friends.
Great to see optimism is alive and well in the bush!
Unfortunately as a cynical city dweller, I fully expect Labor to contrive another excuse under instruction from their union masters.