31 Jan 2013

Are you FOFA ready?

by Matthew Daley, Samantha Carroll

With just over five months to get ready, the time for accelerating FOFA implementation is upon us.

As many organisations operating in the financial services industry would be aware, commencement of the obligations known as the "Future of Financial Advice (FOFA) Reforms" is imminent. These reforms impact an array of Australian Financial Services Licensees in a variety of industries, in particular, those organisations who provide financial advice or arrange for their clients to receive financial advice.

The Australian Government's Future of Financial Advice legislation commenced on 1 July 2012 and compliance will be mandatory from 1 July 2013. The reforms are contained in two related Acts: the Corporations Amendments (Future of Financial Advice) Act 2012 and Corporations Amendments (Further Future of Financial Advice Measures) Act 2012.  Further Regulations may also be forthcoming, in particular, concerning the scope of grandfathering available in relation to conflicted remuneration.

What's happened so far?

During the last six months, the Australian Securities and Investments Commission (ASIC) has released various guidance on the reforms including:

  • Amendments to guidance to take account of the FOFA reforms, including Regulatory Guide 98 – Licensing: Administration action against financial services providers (28 June 2012) and Regulatory Guide 175 – Licensing: Financial product advisers – conduct and disclosure (13 December 2012); and
  • New guidance including: 
    - Regulatory Guide 244: Giving information, general advice and scaled advice (13 December 2012); and
    - Regulatory Guide 245: Fee disclosure statements (25 January 2013).

Further guidance has been foreshadowed by ASIC to be released early this year, including guidance on conflicted remuneration (February 2013 – see Consultation Paper 189) and an update to RG 183: Approval of financial sector codes of conduct.

The FOFA reforms focus on removing conflicts (including a ban on conflicted remuneration structures), improving the quality of financial advice and expanding the availability of more affordable forms of advice. These amendments represent significant reform to the Australian financial services industry.

What you should be thinking about now

With just over five months to get ready, the time for accelerating FOFA implementation is upon us. Over the coming weeks, our Clayton Utz FOFA team will cover the different aspects of the reforms, including:

  • the obligation to act in the client's best interests;
  • scaled advice;
  • fees and conflicted remuneration;
  • conflicts of interest; and
  • governance, risk and compliance management of FOFA,

to help ensure your organisation is 'FOFA-ready'.

Watch this space for our upcoming articles, or feel free to contact any member of the FoFA team in the meantime if you require further information or assistance in preparing for FoFA.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.