BILLS DIGEST NO. 58, 2016–17              8 February 2017

Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016

Paula Pyburne
Law and Bills Digest Section

Date introduced: 23 November 2016

House: House of Representatives

Portfolio: Treasury

Commencement: The earlier of a single day fixed by Proclamation or six months after Royal Assent

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at February 2017.

Purpose of the Bill

The purpose of the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 (the Bill) is to amend the Corporations Act 2001 to raise the education, training and ethical standards of financial advisers by requiring relevant providers of personal advice to retail clients on complex financial products to hold a degree qualification, undertake a professional year, pass an exam, undertake continuous professional development and comply with a code of ethics.

Structure of the Bill

The Bill has two Parts:

•       Part 1 amends the Corporations Act and the Tax Agent Services Act 2009

•       Part 2 contains applications provisions.

Background

Issues relating to the professional, ethical and educational standards of financial advisers have been the subject of a number of formal inquiries dating back as far as 1979.[1]

In order to address some of these issues, in 2011 the Labor Government introduced the Future of Financial Advice reforms (FOFA) into Parliament. This was a package of amendments to the Corporations Act to change how financial advice is delivered to clients. The FOFA reforms were concerned with the way that financial advisers behave when giving advice, including how clients are charged and how fees are disclosed.[2]

The FOFA reforms were the Labor Government’s response to the 2009 report of the Parliamentary inquiry into financial products and services (PJC inquiry no. 1).[3] The impetus for the PJC inquiry no. 1 was a number of significant corporate collapses, including Storm Financial and Opes Prime, which led to considerable losses for many retail investors.[4] The PJC inquiry no. 1 was particularly focussed on the role of financial advisers; the regulatory settings for the selling of financial products and services; the significance of adviser remuneration models—especially payments by commission, their potential for conflicts of interest and the need they create for appropriate disclosure; and generally, the appropriateness of advice and information provided to consumers about financial products and services.[5]

The FOFA reforms were implemented by two key pieces of legislation:[6]

•        the Corporations Amendment (Future of Financial Advice) Act 2012 (FOFA 1) which:

–      required providers of financial advice to obtain client agreement to ongoing advice fees

–      enhanced the requirement for disclosure of fees and services associated with ongoing fees and

–      improved the ability of the Australian Securities and Investments Commission (ASIC) to supervise the financial services industry, through amendments to its licensing and banning powers for financial advisers.

•        the Corporations Amendment (Further Future of Financial Advice Measures) Act 2012 (FOFA 2) which:

–      required those providing personal financial advice to retail clients to act in the best interests of their clients, and to give priority to their client’s interests

–      imposed a prospective ban on conflicted remuneration structures and

–      applied existing regulatory mechanisms under the Corporations Act more directly to individual advisers as well as to licensees.

The implementation date for most of the FOFA reforms was originally 1 July 2012. However, Government amendments during the passage of the legislation provided for the provisions to be voluntary until 1 July 2013, after which time compliance with the relevant requirements would be mandatory.[7]

Issue of competency

Murray report

The global financial crisis (GFC) brought to light significant numbers of Australian consumers holding financial products that did not suit their needs and circumstances. The most significant problems related to shortcomings in disclosure and financial advice, and over-reliance on the financial literacy of the persons receiving financial advice. The changes introduced under the FOFA reforms addressed some of these shortcomings. However, the Financial System Inquiry (FSI) report (known as the Murray Report because of its Chairperson, David Murray), published on 7 December 2014, considered that one of the next issues to be addressed was that of adviser competency.[8] The Murray Report described the issue of adviser competency as follows:

A number of high-profile cases where consumers have suffered significant detriment through receiving poor advice, and a series of ASIC studies, have revealed issues with the quality of advice. For example, ASIC’s report on retirement advice found that only 3 per cent of Statements of Advice were labelled ‘good’, 39 per cent were ‘poor’ and the remaining 58 per cent ‘adequate’. Although these cases and many of these studies occurred before the FOFA reforms to improve remuneration structures, this is not the only issue. Adviser competence has also been a factor in poor consumer outcomes. ASIC’s review of advice on retail structured products found insufficient evidence of a reasonable basis for the advice in approximately half of the files.[9]

To that end, the Murray Report recommended that standards of financial advice should be improved by lifting adviser competency.[10]

Inquiry into proposals

At much the same time, the Parliamentary Joint Committee on Corporations and Financial Services (PJC inquiry no. 2) issued the report of its inquiry into proposals to lift the professional, ethical and education standards in the financial services industry.[11]

The PJC inquiry no. 2 made a series of recommendations including, but not limited to:

•       updating the contents of the register of financial advisers[12]

•       increasing the mandatory minimum educational standard for financial advisers to a degree qualification[13]

•       listing a financial adviser on the register only if they have satisfactorily completed a structured professional year and passed the assessed components; and passed a registration exam set by the Financial Professionals’ Education Council[14]

•       requiring mandatory ongoing professional development for financial advisers[15] and

•       establishing a code of ethics.[16]

Diagram 1: key components of the PJC model

Source: Treasury, Lifting the professional, ethical and education standards in the financial services industry, Consultation paper, March 2015, p. 6.

Issue of culture

The Senate Economics References Committee (Economics Committee) 2016 inquiry into agribusiness managed investment schemes—which looked at the collapse of forestry-based managed investment schemes (MIS) such as Timbercorp and Willmott Forests—considered that the issue was not only one of competency but also one of culture.[17] Describing the issue, the Economics Committee said:

Much of the conduct detailed throughout this report, however, goes beyond competence. In many cases, the financial adviser was acting unethically—ignoring the client's risk profile, failing to disclose commissions or underplaying risks attached to the investment strategy. In some of the more egregious examples, submitters allege that their adviser falsified documents, withheld documents, and deliberately misled them.[18]

The Economics Committee noted that the government had made a commitment to require financial advisers to adhere to a code of ethics and added:

In light of the evidence demonstrating that integrity issues were at the heart of some of the poor financial advice given to MIS investors, the committee highlights the importance of establishing such a robust code of ethics and that this measure warrants close and determined attention.[19]

Consultation

In March 2015, Treasury issued a consultation paper seeking public comment on the key components of the model proposed by the PJC inquiry no. 2 set out in Diagram 1, above.[20]

Treasury received 56 submissions in relation to its consultation.[21] Comments of submitters are canvased under the heading ‘Key issues and provisions’ in this Bills Digest.

Final form of the Bill

The Bill in its final form does not reflect all of the key components of the model recommended by the PJC inquiry no. 2. For instance, the PJC recommended the establishment of the Finance Professionals Education Council (FPEC) to set curriculum requirements, develop a structured professional year, develop and administer a registration examination and establish professional pathways.

The Bill does not establish the FPEC. Instead, it establishes a standards body (yet to be named), as a Commonwealth company limited by guarantee. Nevertheless, the standards body has the functions that the PJC envisaged would be carried out by the FPEC.

Other requirements are also absent from the Bill, including compulsory membership of a professional association and the requirement that professional associations representing individual financial advisers establish a code of ethics to be approved by the Professional Standards Council's. This Bills Digest will highlight differences between the PJC inquiry no. 2 model and the model proposed in the Bill where they occur.

Committee consideration

Selection of Bills Committee

At its meeting of 1 December 2016, the Selection of Bills Committee determined that the Bill will not be referred to a Senate Committee for inquiry and report.[22]

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills commented on the Bill in its Alert Digest of
30 November 2016.[23] Those comments are canvassed under the heading ‘Key issues in provisions’ in this Bills Digest.

Policy position of non-government parties/independents

At the time of writing this Bills Digest, there had been little public comment about the Bill, although Independent Member, Cathy McGowan, expressed a desire that the Bill be passed in the House of Representatives in November 2016.[24]

It is likely though, given the long gestation of the Bill and the recommendations of the inquiries which were the precursors of the Bill, that it will receive in-principle support from many Members and Senators across the political divide.

Position of major interest groups

The submissions to Treasury in relation to its consultation paper are primarily in favour of raising educational, professional and ethical standards in order to ‘rebuild confidence and trust in the advice sector and improve the quality of advice to acceptable levels’.[25]

According to CPA Australia and Chartered Accountants Australia-New Zealand:

A robust and tailored education framework complemented by a structured professional experience year is integral to ensuring the eligibility requirements to provide financial planning advice are commensurate with the level of responsibility that a financial planner has when providing such advice.[26]

However, there is some disagreement between submitters as to what level of education is required. In any event, submitters strongly argued that the requirement for a certain level of education for those persons who are working in the financial planning and financial advice industries at present, should be subject to grandfathering.[27] The Bill contains relevant grandfathering provisions.

Financial implications

According to the Explanatory Memorandum to the Bill, its financial impact on the Australian Government will be nil.[28]

However, the compliance cost for the financial service industry has been calculated as $165.1 million.[29]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[30]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights considers that the Bill does not raise human rights concerns.[31]

Key issues and provisions

Chapter 7 of the Corporations Act sets out the rules about financial services and markets. Within Chapter 7, Part 7.6 contains provisions relating to the licensing of providers of financial services—in particular, the requirement for an Australian financial services licence (AFS Licence).[32]

Item 12 in Part 1 of the Bill inserts proposed Divisions 8A, 8B and 8C into Part 7.6 of the Corporations Act.

Creating the standards body

PJC inquiry no. 2 recommendation

The PJC recommended that the professional associations establish an independent Finance Professionals Education Council (FPEC) to, amongst other things, set curriculum requirements and to develop a standardised framework and standard for the graduate professional year to be administered by professional associations.[33] The PJC also recommended that professional associations be required to establish codes of ethics.[34]

Bell Potter Securities strongly agreed that this role should be undertaken by the relevant professional associations, stating:

The lifting and maintenance, monitoring and enforcement and ongoing professionalism of the financial services industry is best accomplished through and by professional associations, which it is compulsory for financial advisers in the sector to join. The implementation and management of that process would be funded by the membership fees paid to the professional association so it would essentially be a user pays process.[35]

The final form of the Bill does not reflect this aspect of the PJC’s recommended model.

Composition

Proposed Division 8C of Part 7.6 of the Corporations Act provides for a standards body. The Bill empowers the Minister to declare, by notifiable instrument, that a body corporate is the standards body.[36] The Minister must table the declaration in each House of the Parliament as soon as practicable.

The Bill sets out the requirements to be met by the body corporate, including that it is a company limited by guarantee and its constitution provides that it must not be operated for profit.[37] There are to be nine directors, appointed by the Minister, of whom (excluding the chair of the board of directors):

•       at least three must have experience in carrying on a financial services business or providing a financial service[38]

•       at least three must have experience in representing consumers of financial services[39]

•       at least one must have experience in the field of ethics[40] and

•       at least one must have experience in designing, or the requirements of, educational courses or qualifications.[41]

Key issue—independence

The composition of the standards body, with its mix of subject matter expertise for the directors, is consistent with the model proposed by CHOICE which advocated that any new body:

… is governed by a board that is comprised of half members with relevant consumer skills and experience, half members with relevant industry skills and experience, and an independent Chair. Members should be appointed based on their experience as opposed to representing any particular organisation.[42]

Constitution

The constitution of the body must also state that a director must not hold a managerial or executive office in a professional association or association representing consumers of financial services, or represent such an association if he, or she, is a member of it.[43] Where a standards body makes a significant modification to its constitution, it must notify the Minister in writing of the modification, including the text of the modification, the date on which it takes effect and an explanation of the purpose of the modification. If the standards body does not lodge a notice with the Minister within 21 days after the modification takes effect, the modification will cease to have effect.[44] The Minister may disallow all or part of a notified significant modification. The modification ceases to have effect when the standards body receives the Minister’s notice of disallowance (which must be provided as soon as practicable after the decision to disallow is made).[45]

The Minister may, at any time, by notifiable instrument, revoke a declaration that a body is a standards body. The Minister must table the revocation in each House of the Parliament as soon as practicable.[46]

Professional standards

Application of professional standards

Under proposed Division 8A, which is inserted into Part 7.6 of the Corporations Act by item 12 of the Bill, the professional standards take two forms—educational and ethical. They apply to a relevant provider being a person who is:

•       a financial services licensee (AFS licensee)

•       an authorised representative, an employee or director of an AFS licensee or

•       an employee or director of a related body corporate of an AFS licensee who is authorised to provide personal advice to retail clients, as the licensee or on behalf of the licensee, in relation to relevant financial products.[47]

For the purposes of Part 7.6 of the Corporations Act, relevant financial products are financial products other than basic banking products, general insurance products, consumer credit insurance or a combination of any of those products.[48]

Diagram 2 below shows the current regulatory arrangements. Diagram 2: current regulatory arrangements

Source: Treasury, Lifting the professional, ethical and education standards in the financial services industry, Consultation paper, March 2015, p. 9.

Education and training

The Bill imposes four education and training standards:

•       first, the person must have completed a bachelor or higher degree, or equivalent qualification, approved by the standards body or have completed a foreign qualification which has been approved by the standards body[49]

•       second, the person must have passed an exam approved by the standards body[50]

•       third, the person must have undertaken at least one year of work and training that meets the requirements set by the standards body[51] and

•       fourth, the person must meet the requirements for continuing professional development set by the standards body.[52]

A person who is undertaking work and training in accordance with the third standard is a provisional relevant provider.[53] A provisional relevant provider must be supervised by a relevant provider who must approve, in writing, any Statement of Advice provided by the provisional relevant provider to a retail client.[54] The Bill sets out the various obligations for supervisors.[55] According to the Explanatory Memorandum to the Bill:

These requirements are designed to ensure that there is a direct relationship between a supervisor and the provisional relevant provider…

There is little detail about the first requirement … for appropriate supervision … in the Corporations Act. Instead, the Corporations Act merely sets out the general principle and the [standards] body will be responsible for “unfolding” the general principle and providing further details or guidance about what amounts to appropriate supervision. This approach ensures that specific technical requirements are set by the body with specialist knowledge and the requirements can be more easily updated when practices change.[56]

The Bill provides for the banning or disqualification of a person who has not complied with one or more of their supervisory obligations.[57]

ASIC must not grant a person an AFS License that covers the provision of personal advice to retail clients in relation to relevant financial products if the person has not met any one or more of the education and training standards.[58]

Existing section 916A of the Corporations Act allows an AFS Licensee to authorise another person (called an authorised representative) to provide a specified financial service on their behalf. Where an authorised representative is a corporation, section 916B of the Corporations Act provides that the corporation may, with the consent of the AFS licensee, authorise an individual/s to provide specified financial services on behalf of the licensee.[59] This is called sub-authorisation. However, an authorised representative who is an individual cannot authorise another individual to be an authorised representative.[60]

The Bill provides that such an authorisation or sub-authorisation must not be given to a person who does not:

•       satisfy the first three education and training standards or

•       satisfy the first two standards and is undertaking work and training in accordance with the third standard.[61]

The Bill provides for the banning or disqualification of a person who has been authorised to provide personal advice to retail clients but has not met the education and training standards.[62]

The Bill inserts the term CPD year (being a continuing professional development year) into the Corporations Act.[63] A relevant provider must meet the requirements for continuing professional development set by the standards body during the licensee’s CPD year.[64]

Item 2 of the Bill amends paragraph 912A(1)(f) of the Corporations Act so that one of the general obligations of an AFS Licensee is to ensure that its representatives are adequately trained (including by complying with the requirement for continuing professional development). This rule does not apply to a provisional relevant provider.[65]

Stakeholder comments

Whilst the requirement for a uniform minimum level of education was strongly supported, views differed as to what that should be. Currently the minimum education level is AQF5—which is a diploma-level qualification.[66] The Australian Bankers’ Association supported ‘increasing the mandatory minimum educational standard for financial advisers to a degree or degree equivalent qualification … with core and sector specific requirements set by the standards setting body’.[67] The Commonwealth Bank agreed.[68]

According to the Institute of Public Accountants there are three main implications of requiring advisers to hold a relevant bachelor degree:

First, consideration must be given to the inclusion and treatment of existing advisers who do not hold a degree but have significant experience in the ‘university of life’.

Second, consideration must be given to the capacity of the university system to cater for the expected increase in their programs, including the development of conversion courses. The Institute believes that existing university providers of financial planning degrees would be able to meet the demand, with additional entrance likely to commence offering degrees.

Third, a consistent approach to any ‘gap’ analysis conducted across the industry for those that may have completed other degrees. The institute is concerned that human nature is to do the bare minimum and that some advisers and licensees will be more aggressive rather than conservative in recognising prior learning.[69]

Whilst Kaplan Australia supported the higher minimum education level it was mindful of the additional cost:

Currently, the Diploma of Financial Planning retails for between $800 and $1500 for the entire award. A bachelor degree can start in price from $15,000 per year (Equivalent Full Time Student Load). This increase in cost could potentially affect supply of financial advisers, at least in the short term.[70]

The SMSF Association noted that increasing the education and registration requirements:

… may prove a barrier to entry to the financial advice market for new and some existing financial advisers. This would be expected as a natural consequence of lifting standards and entry requirements for financial advisers …

This is to be an expected trade-off for improving financial advice standards and is acceptable if the consumer benefit of higher quality and competent financial advice is realised.[71]

The requirement to undertake continuing professional development already exists for legal practitioners. BT Financial Group went so far in its submission to Treasury as to recommend a Practising Certificate (similar to that issued to legal professionals) be introduced for financial planners on the grounds that the Certificate ‘would give consumers confidence that their financial planner meets all the relevant requirements’.[72] However, the Bill does not contain such a requirement.

Application provisions

Item 27 of the Bill inserts proposed Part 10.23A—Transitional provisions relating to the Corporations Amendment (Professional Standards of Financial Advisers) Act 2016 into Chapter 10 of the Corporations Act.

The application provisions in Part 2 of the Bill define the term existing provider as a person who:

•       is a relevant provider at any time between 1 January 2016 and 1 January 2019 and is not banned, disqualified or suspended on 1 January 2019 or

•       at any time between 1 January 2016 and 1 January 2019, provides personal advice in a foreign country to retail clients in relation to relevant financial products and is not prohibited under the law of the foreign country from providing such advice on 1 January 2019.[73]

The Bill provides that an existing provider must have met the first education and training standard by 1 January 2024—that is, the person must have completed a bachelor or higher degree, or equivalent qualification, approved by the standards body or have completed a foreign qualification which has been approved by the standards body.[74]

In addition, an existing provider must have met the second education and training standard before 1 January 2021—that is, the person must have passed an exam approved by the standards body.[75]

Ethical standards

The standards body must, by legislative instrument, make a code of ethics.[76] A relevant provider must comply with the Code of Ethics.[77] According to the PJC inquiry no. 2, ‘adoption and implementation of codes of ethics would help to move the financial advice industry towards a resilient professional culture that would lead to consistent ethical behaviour’.[78]

The submission by Estplan explains the problem to be remedied as follows:

A framework to increase professional, educational and ethical standards is important, however this framework needs to refocus adviser mindset from being a product salesperson to becoming a genuine service provider for consumers. Part of this needs to address the influence that fund managers have on the industry and the incentive programs offered by these to advisers. This drives advisers to make decisions in their own best interest rather than that of the client.[79]

Consultation

Before making a code of ethics, the standards body must consult relevant stakeholders including financial services licensees, relevant providers, associations representing consumers of financial services, professional associations, ASIC and the Department[80] and any other relevant body or person.[81] The Bill deems the requisite consultation to have occurred if, before making the legislative instrument, the standards body makes the proposed legislative instrument, or a description of its content, available on its website and invites comment from those persons and bodies.[82]

The requirement for consultation applies in equivalent terms if the standards body intends to make determinations by legislative instrument about any of the elements of the education and training standards and the Code of Ethics.[83]

Comments by the Scrutiny of Bills Committee

Review of decisions

The Scrutiny of Bills Committee (the Committee) noted that no explanation has been provided as to whether decisions of the standards body in fulfilling its functions to develop education standards and the Code of Ethics will be subject to judicial review—this is especially important as the Administrative Decisions (Judicial Review) Act 1977 does not apply to decisions of a legislative nature. In addition, the corporate status of the standards body may mean that it does not qualify as ‘an officer of the Commonwealth’ and so may not be susceptible to review under section 39B of the Judiciary Act 1903. Accordingly, the Committee has sought the Minister’s advice as to whether, and under what jurisdiction, the standards body’s decisions will be subject to judicial review.[84]

Delegation of legislative power

Proposed section 921U sets out the functions of the standards body including the making of legislative instruments. The Committee acknowledged that this section may be characterised as a framework provision, in that it allows the proposed standards body to provide for many important details of the new regulatory scheme for financial advisers to be set out in the legislative instrument, rather than on the face of the Bill. The Committee accepted the explanation set out in the Explanatory Memorandum in respect of proposed subsection 921U(5) (which relates to the setting of requirements for provisional relevant providers).[85]

However, the Committee expressed concern in relation to proposed subsections 921U(3) and (4), which are described as Henry VIII clauses as together they allow the operation of the Corporations Act to be modified by delegated legislation.[86] The Committee noted that such clauses ‘may subvert the appropriate relationship between the Parliament and the Executive branch of government’.[87] The Committee has sought the advice of the Minister as to the rationale for allowing these clauses.

Compliance schemes

Requirement for membership in a compliance scheme

The model which arose out of PJC inquiry no. 2 essentially placed responsibility for establishing a code of ethics and monitoring compliance with the code with the relevant professional associations. As stated above, the Bill does not reflect this. Instead, the Bill provides for a compliance scheme which is to monitor and enforce compliance with the Code of Ethics by a relevant provider. A compliance scheme must have a name and must name the monitoring body for the scheme.[88]

A relevant provider—whether an AFS licensee or a relevant provider authorised to provide personal advice to retail clients on behalf of an AFS licensee, in relation to relevant financial products—must be covered by a compliance scheme.[89] The coverage must commence within 30 business days of either:

•       the day the person becomes a relevant provider or

•       where the relevant provider was previously covered by a scheme which has since ceased to cover him or her, —the day that compliance scheme cover ceased.[90]

Approval of compliance schemes

A monitoring body for a compliance scheme may make an application to ASIC for approval of the compliance scheme setting out:

•       the name of the monitoring body

•       how compliance with the Code of Ethics by relevant providers covered by the scheme will be monitored

•       the sanctions imposed on relevant providers for failures to comply with the Code of Ethics

•       how it is proposed to resolve disputes between the monitoring body and relevant providers and

•       the arrangements for making complaints to the monitoring body about a failure, or possible failure, by a relevant provider to comply with the Code of Ethics.[91]

ASIC may approve the scheme, either with or without conditions, where it is satisfied that the monitoring body has sufficient resources and expertise to appropriately monitor and enforce compliance with the Code of Ethics—and that it will appropriately monitor and enforce compliance of the Code of Ethics under the scheme.[92] While the approval is in force, the monitoring body must ensure that the scheme is publicly available.[93]

If ASIC considers that compliance with the Code of Ethics is not being appropriately monitored or enforced, that the monitoring body has not complied with the obligations set out in proposed Division 8B, or that the monitoring body does not have the resources or expertise to appropriately monitor or enforce compliance, then ASIC may revoke an approval, vary a condition of the approval or impose additional conditions relating to the approval of the compliance scheme.[94]

Modification and review of a compliance scheme

Once a compliance scheme has been approved by ASIC, the monitoring body for the scheme may, by written notice given to ASIC, propose to modify the scheme. The notice must set out the text of the proposed modification and explain its purpose.[95]

Within 28 days beginning on the day ASIC receives the notice, ASIC may, by written notice given to the monitoring body, disallow all or part of the proposed modification. If ASIC disallows the proposed modification within that period, the proposed modification does not take effect.[96] Otherwise, the proposed modification takes effect at the end of the 28-day period.[97]

A monitoring body for a compliance scheme must initiate a review of the scheme before the end of the five-year period beginning on the day ASIC approves the scheme and each subsequent five-year period. As soon as reasonably practical after the review has been completed, the monitoring body must make the review publicly available and give a copy of the review to ASIC.[98]

Being covered by a compliance scheme

Under the Bill, a compliance scheme covers a relevant provider if:

•       an ASIC approval for the compliance scheme is in force

•       the notice lodged with ASIC for the purpose of the Register of Relevant Providers advised that the relevant provider would be covered by the scheme[99] and

•       the monitoring body for the compliance scheme is a professional association—the relevant provider is a member of that association.[100]

Investigation by the monitoring body

The monitoring body must not be an AFS licensee or an associate of an AFS licensee.[101]

If the monitoring body for a compliance scheme becomes aware of a failure, or possible failure, by the relevant provider to comply with the Code of Ethics, it must notify the relevant provider that it has become so aware and, after investigation, it will make a determination, in writing, about whether a failure to comply with the Code of Ethics has occurred.[102]

In conducting its investigation, the monitoring body may request, in writing, information, documents or any other reasonable assistance, within a reasonable specified period from the AFS licensee on whose behalf the relevant provider provides advice, the relevant provider or an authorised representative who gave a sub-authorisation to the relevant provider.[103] It is an offence if the person fails to comply with the request within the period specified.[104]

The monitoring body must make the determination within a reasonable period of becoming aware of the failure, or possible failure, by the relevant provider to comply with the Code of Ethics. The exception to this rule is where the relevant provider notifies the monitoring body that it intends to move to another compliance scheme. In that case the determination must be made within 160 days of receiving the notice.[105] A relevant provider commits an offence by leaving a compliance scheme before an investigation is completed.[106]

A person commits an offence if the person is a monitoring body for a compliance scheme and the person uses or discloses information which has received in accordance with subsection 70-40(3AA) of the Tax Agent Services Act 2009 for a purpose other than monitoring or enforcing compliance with the Code of Ethics. The maximum penalty is 10 penalty units which is equivalent to $1,800.[107]

Where a monitoring body for a compliance scheme determines that the relevant provider has failed to comply with the Code of Ethics or the monitoring body imposes a sanction on the relevant provider in relation to such a failure, the monitoring body must notify the licensee within 30 days after making the determination or imposing the sanction.[108]

Register of relevant providers

PJC inquiry no. 2

PJC inquiry no. 2 considered it essential that a public register of financial advisers be developed on the grounds that such a register would play a part in ‘ensuring that financial advice provided to customers and investors is only provided by suitably qualified professionals’.[109] On 16 February 2015, the Government registered the Corporations Amendment (Register of Relevant Providers) Regulation 2015 which created a public register of all natural persons providing personal advice on more complex products to retail clients.[110] The terms of the regulation have now been incorporated into the Corporations Regulations 2001 (at Schedule 8D).

Terms of the Bill

The amendments in the Bill in relation to the Register of Relevant Providers are in near-equivalent terms to those in the Regulations with some additional details required. The Bill is consistent with the recommendations of the PJC inquiry no. 2 in relation to the Register.[111]

Item 16 of the Bill inserts proposed Subdivision C into Division 9 of Part 7.6 of the Corporations Act. Division 9 in its current form is about registers relating to financial services.

Proposed Subdivision C requires ASIC to enter details on a Register of Relevant Providers in respect of each person who is, or was, a relevant provider and sets out the details that must be entered on the Register.[112] Those details include, but are not limited to:

•       the relevant provider's name and principal place of business[113]

•       the relevant provider’s date and place of birth[114]

•       the recent advising history of the relevant provider (see discussion below)[115]

•       if the relevant provider has been disqualified from managing corporations—information contained on the Register of disqualified company directors and other officers[116]

•       if the relevant provider has been banned or disqualified under the National Consumer Credit Protection Act 2009—information about that banning or disqualification[117]

•       if the relevant provider has been banned, disqualified or suspended under the Superannuation Industry (Supervision) Act 1993—information about that banning, disqualification or suspension[118]

•       information about the educational qualifications of, and any training courses completed by, the relevant provider to the extent that the qualifications and training courses are relevant to the provision of financial services[119]

•       the name of the compliance scheme that is to cover the relevant provider.[120]

Proposed Subdivision B sets out the information to be given to ASIC about a relevant provider. The requirements are consistent with the information that is to be held in the Register of Relevant Providers.[121]

As stated above, ASIC is to be advised of the recent advising history of a relevant provider. Where the relevant provider is, or was, a financial services licensee authorised to provide personal advice to retail clients in relation to relevant financial products—the information must be provided for each period during which the relevant provider was such a licensee. Equivalent information is required in relation to an authorised representative.[122]

Ongoing obligation to notify ASIC

The Bill also sets out a number of ongoing obligations to notify ASIC of certain information.[123] A failure to comply with the obligation to notify ASIC gives rise to an offence. The maximum penalty for the offence is 50 penalty units which is equivalent to $9,000.[124]

Restriction on the use of the term financial adviser

Current law

Currently, section 766A of the Corporations Act provides that a person provides a financial service if they:

•       provide financial product advice

•       deal in a financial product

•       make a market for a financial product

•       operate a registered scheme

•       provide a custodial or depository service or

•       engage in conduct of a kind prescribed by regulations.

Financial product advice is a recommendation or a statement of opinion that is intended to influence a person in making a decision about a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products or could reasonably be regarded as being intended to have such an influence.[125]

Personal advice is financial product advice that is given to a person (including by electronic means) in circumstances where the provider of the advice has considered one or more of the person’s objectives, financial situation and needs or a reasonable person might expect the provider to have considered one or more of those matters.[126]

General advice is financial product advice that is not personal advice.[127]

PJC inquiry no. 2

The PJC inquiry no. 2 noted that there was a tension between the sales of financial products and services and the giving of advice about financial products and services. It was noted that the final report of the Financial Services Inquiry ‘confirmed that consumers may misinterpret or excessively rely on guidance, advertising, and promotional and sales material when it is described as “general advice”. Additionally, the use of the word “advice” may lead consumers to believe the information is tailored to their needs’.[128]

The inquiry recommended that the government should introduce legislation to protect the titles ‘financial adviser’ and ‘financial planner’ and require that, to be eligible to use the title ‘financial adviser’, an individual must be registered as a financial adviser.[129]

Terms of the Bill

Item 17 of the Bill inserts proposed section 923C into Division 10 of Part 7.6 of the Corporations Act, which contains restrictions on the use of the terms financial adviser and financial planner. The effect of the provision is that those terms may not be assumed or used by a person who is not a relevant provider. The use of the terms by a person who is a provisional relevant provider or a limited-service time-sharing adviser is specifically prohibited.[130] In addition, a person (called the first person) contravenes this restriction if the first person carries on a financial services business or provides a financial service and another person provides a financial service on behalf of the person and the first person assumes or uses a restricted word or expression in relation to the service; and the first person is not a relevant provider or the first person is a provisional relevant provider or a limited-service time-sharing adviser.[131]

Currently, paragraph 1311(1)(a) of the Corporations Act provides that a person who does an act or thing that the person is forbidden to do by the Corporations Act is guilty of an offence. This general rule will only apply if a penalty, pecuniary or otherwise, is set out in Schedule 3. A general offence under subsection 1311(1) is punishable by a penalty not exceeding the maximum penalty prescribed for the offence in Schedule 3 of the Corporations Act. Accordingly, item 20 of the Bill amends Schedule 3 of the Corporations Act so that the maximum penalty for a breach of the restriction on the use of the terms financial adviser and financial planner is 10 penalty units (being equivalent to $1,800) for each day, or part of a day, in respect of which the offence is committed.[132]

There are some exceptions to the rule about using a restricted word or expression. For example, a contravention will not occur where a person provides advice to wholesale clients and uses the restricted term only in relation to that advice.[133] Similarly, a contravention will not occur where a person is an employee or director of a body, provides advice to the body and uses the restricted term only in relation to that advice.[134]

Comments by the Scrutiny of Bills Committee

The Committee noted the reversal of the evidential burden of proof in the context of these exceptions, stating:

Subsection 13.3(3) of the Criminal Code Act 1995 provides that a defendant who wishes to rely on any exception, exemption, excuse, qualification or justification bears an evidential burden in relation to that matter.

While the defendant bears an evidential burden (requiring the defendant to raise evidence about the matter), rather than a legal burden (requiring the defendant to positively prove the matter), the committee expects any such reversal of the evidential burden of proof to be justified. The committee's consideration of the appropriateness of a provision which reverses the burden of proof is assisted if it explicitly addresses relevant principles as set out in the Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers.[135]

As explanatory material for the Bill did not address this issue, the Committee has sought appropriate justification from the Minister.

Stakeholder comments

Industry Super Australia strongly supported ‘the enshrinement of “Financial Adviser” in legislation’ on the grounds that it ‘would provide greater clarity on the role and responsibilities of financial advisers as well as a legal basis for the requirement of a higher minimum standard’.[136] Pajeska Group agreed that legislative protection for the term financial planner is necessary ‘as a higher degree of care is associated with performing the duties of a financial planner’.[137]

On the other hand the SMSF Association did not signal the need for the terms to be protected by legislation.

With registration limited to those that have met the relevant standards, the term “financial adviser” should be limited to those that have met the relevant standards and are registered.

We do not believe that “financial planner” is needed as a protected generic term for advisers as this would cause confusion for consumers, as financial planning is a specialisation of the broader area of financial advice.[138]

Other provisions

Amendments to the Tax Agent Services Act

The Tax Agent Services Act:

•       establishes the national Tax Practitioners Board (the Board) to register fit and proper persons with the appropriate qualifications and experience as registered tax agents or BAS agents[139]

•       introduced a Code of Professional Conduct (the Code) to regulate the personal and professional conduct of a registered tax agent or BAS agent

•       provided for sanctions to be imposed by the Board for failure to comply with the Code

•       provided for termination of registration by the Board if a person ceases to meet the tax practitioner registration requirements and

•       provides for civil penalties if an unregistered person provides tax agent services or BAS services for a fee, advertises that such services can be provided or makes representations that such services can be provided.[140]

According to the Explanatory Memorandum:

The Board is responsible for enforcing compliance with the Code of Professional Conduct in Part 3 of the [Tax Agent Services Act]. The Code of Professional Conduct in the [Tax Agent Services Act] applies to tax agents, BAS agents and tax financial advisers. Many of the approximately 20,000 tax financial advisers are also relevant providers, and as such they will be bound by both the new body’s Code and the Code of Professional Conduct in the [Tax Agent Services Act.] [141]

The Bill amends the Tax Agent Services Act to:

•       require the Board to notify the relevant monitoring body of the outcome of all investigations which relate to persons who are also relevant providers[142] and

•       empower the Board to request additional information from monitoring bodies about the monitoring body’s compliance scheme or the compliance of a relevant provider with the Code or the Code of Professional Conduct in the Tax Agent Services Act.[143]

The Board has the power to share any information, including official information, with monitoring bodies if the information is provided to monitoring bodies for the purposes of monitoring or enforcing compliance with the new Code. The Bill creates an exemption from the general prohibition in section 70–35 of the Tax Agent Services Act on the disclosure by the Board of official information.[144]

Item 26 of the Bill amends the Dictionary in the Tax Agent Services Act so that the terms Code of Ethics, compliance scheme, covers and monitoring body have the same meaning as in Part 7.6 of the Corporations Act.

Concluding comments

Although the Bill does not put into effect all the actual recommendations of PJC inquiry no. 2—particularly with regard to the establishment of a Financial Professionals Education Council—it does implement the spirit of the recommendations which were the centrepiece of the PJC’s report. The Bill applies to an individual who is:

•       a financial services licensee (AFS licensee)

•       an authorised representative, an employee or director of an AFS licensee or

•       an employee or director of a related body corporate of an AFS licensee and

who is authorised to provide personal advice to retail clients, as the licensee or on behalf of the licensee, in relation to relevant financial products.

It ensures that education standards are sufficiently high to improve the competency of members of the financial services industry. In addition, the proposed Code of Ethics should address issues relating to culture which have been identified as so problematic in the past.

The Bill operates so that the Register of Relevant Providers will contain relevant information so that members of the public will be able to ensure that the person who is providing them with financial advice satisfies the higher education and ethical standards.

Finally, the Bill restricts the use of the titles ‘financial adviser’ and ‘financial planner’ so that they can only be used by persons who are relevant providers. This should go some way to repairing the loss of public confidence in the finance industry.

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[1].              A comprehensive list of the enquiries is contained in the report of the Parliamentary Joint Committee on Corporations and Financial Services (PJCCFS), Inquiry into proposals to lift the professional, ethical and education standards in the financial services industry, Canberra, December 2014, pp. 3–15.

[2].              Australian Securities and Investments Commission (ASIC), ‘FOFA—background and implementation’, ASIC website.

[3].               Inquiry homepage, PJCCFS, ‘Inquiry into financial products and services in Australia’.

[4].               PJCCFS, Inquiry into financial products and services in Australia, media release, 23 November 2009.

[5].              PJCCFS, Inquiry into financial products and services in Australia: terms of reference.

[6].              Further information about the originating Bills, including links to the debate, the Bills Digests and committee consideration are available at the Bills homepages: Parliament of Australia, ‘Corporations Amendment (Future of Financial Advice) Bill 2012 homepage’, Australian Parliament website; and Parliament of Australia, ‘Corporations Amendment (Further Future of Financial Advice Measures) Bill 2012 homepage’, Australian Parliament website.

[7].               Treasury, ‘Future of Financial Advice: implementation’, Treasury website; B Shorten (Minister for Financial Services and Superannuation), Government's financial advice reforms pass the parliament, media release, 20 June 2012. Note that some of the FOFA measures were rolled back by the Corporations Amendment (Financial Advice Measures) Act 2016. For information about the originating Bill, see Parliament of Australia, ‘Corporations Amendment (Financial Advice Measures) Bill 2016 homepage’, Australian Parliament website.

[8].              Financial System Inquiry, Financial system inquiry, Final report, (Murray Report), Commonwealth of Australia, Canberra, November 2014, p. 223.

[9].              Ibid., p. 218.

[10].              Ibid., recommendation 25, p. 28, 222; and recommendation 40, p. 195, 271.

[11].              Details of the terms of reference, submissions to the inquiry and the Committee's final report are available on the inquiry homepage.

[12].              PJCCFS, Inquiry into proposals to lift the professional, ethical and education standards in the financial services industry, op. cit., recommendation 5, pp. 29–30.

[13].              Ibid., recommendation 7, p. 45.

[14].              Ibid., recommendation 8, p. 48.

[15].              Ibid., recommendation 9, p. 52.

[16].              Ibid., recommendation 11, p. 65.

[17].              Senate Economics References Committee, Agribusiness managed investment schemes: bitter harvest, Inquiry report, The Senate, Canberra, March 2016.

[18].              Ibid., p. 111.

[19].              Ibid., p. 112.

[20].              Treasury, Lifting the professional, ethical and education standards in the financial services industry, Consultation paper, March 2015.

[21].              Treasury, ‘Lifting the professional, ethical and education standards in the financial services industry: submissions’, Treasury website.

[22].              Senate Standing Committee for Selection of Bills, Report, 10, 2016, The Senate, Canberra, 1 December 2016.

[23].              Senate Standing Committee for the Scrutiny of Bills, Alert Digest, 10, 2016, The Senate, 30 November 2016, pp. 4–8.

[24].              C McGowan, ‘Statements by members: financial planning’, House of Representatives, Debates, 29 November 2016, p. 4742.

[25].              Industry Super Australia and Australian Institute of Superannuation Trustees, Submission to Treasury, Lifting the professional, ethical and educational standards in the financial services industry, (Treasury inquiry), 7 May 2015, p. 5.

[26].              CPA Australia and Chartered Accountants ANZ, Submission, Treasury inquiry, p. 3.

[27].              Pajeska Group Pty Ltd, Submission, Treasury inquiry.

[28].              Explanatory Memorandum, Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016, p. 3.

[29].              Ibid.

[30].              The Statement of Compatibility with Human Rights can be found at pages 89–90 of the Explanatory Memorandum to the Bill.

[31].              Parliamentary Joint Committee on Human Rights, Report, 10, 2016, Canberra, 30 November 2016, p. 8.

[32].              Corporations Act, section 911A.

[33].              PJCCFS, Inquiry into proposals to lift the professional, ethical and education standards in the financial services industry, op. cit., recommendation 10, p. xv.

[34].              Ibid., recommendation 11, p. 32.

[35].              Bell Potter Securities Ltd, Submission, Treasury inquiry, p. 1.

[36].              Corporations Act, proposed subsection 921X(1). Generally, unlike legislative instruments, notifiable instruments are not subject to Parliamentary scrutiny, nor are they subject to automatic repeal 10 years after registration. Legislation Act 2003, section 7.

[37].              Corporations Act, proposed paragraph 921X(2)(a) and proposed subparagraph 921X(2)(c)(ii) respectively.

[38].              Corporations Act, proposed subparagraph 921X(2)(c)(iv).

[39].              Corporations Act, proposed subparagraph 921X(2)(c)(v).

[40].              Corporations Act, proposed subparagraph 921X(2)(c)(vi).

[41].              Corporations Act, proposed subparagraph 921X(2)(c)(vii).

[42].              Choice, Submission, Treasury inquiry.

[43].              Corporations Act, proposed subparagraphs 921X(2)(c)(viii) and (ix).

[44].              Corporations Act, proposed section 921Z.

[45].              Corporations Act, proposed section 921ZA.

[46].              Corporations Act, proposed section 921Y.

[47].              Item 1 of the Bill inserts the definition of relevant provider into section 910A of the Corporations Act.

[48].              Item 1 of the Bill inserts the definition of relevant financial products into section 910A of the Corporations Act.

[49].              Corporations Act, proposed subsection 921B(2). Note that currently ASIC’s Licensing: training of financial product advisers, Regulatory guide, 146, July 2012, sets out the minimum knowledge, skill and education standards for financial advisers and provides information on how advisers can meet these standards. However, according to the Explanatory Memorandum to the Bill, ‘the current standards in RG146 are not commensurate with the level required to ensure appropriate technical and professional competence’. Explanatory Memorandum, op. cit.,
p. 6.

[50].              Corporations Act, proposed subsection 921B(3).

[51].              Corporations Act, proposed subsection 921B(4).

[52].              Corporations Act, proposed subsection 921B(5).

[53].              Item 1 of the Bill inserts the definition of provisional relevant provider into section 910A of the Corporations Act.

[54].              Corporations Act, proposed subsections 921F(2) and (4).

[55].              Corporations Act, proposed subsections 921F(2)–(6).

[56].              Explanatory Memorandum, Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016, pp. 19–20.

[57].              Item 10 of the Bill inserts proposed paragraphs 920A(1)(db) and (dc) into section 920A of the Corporations Act.

[58].              Corporations Act, proposed subsection 921C(1).

[59].              Corporations Act, subsection 916B(3).

[60].              Corporations Act, subsection 916B(1).

[61].              Corporations Act, proposed subsections 921C(2)–(4).

[62].              Item 10 of the Bill inserts proposed paragraph 920A(1)(de) into section 920A of the Corporations Act.

[63].              Item 1 of the Bill inserts the definition of CPD year into section 910A of the Corporations Act. A financial services licensee’s CPD year is the 12-month period beginning on the day of the year included in the most recent notice given by the licensee under proposed section 922HA.

[64].              Corporations Act, proposed subsection 921D(1).

[65].              Corporations Act, proposed subsection 921D(2).

[66].              CPA Australia and Chartered Accountants ANZ, Submission, Treasury inquiry, 7 May 2015, p. 8.

[67].              Australian Bankers’ Association, Submission, Treasury inquiry, 7 May 2015, p. 5.

[68].              Commonwealth Bank of Australia, Submission, Treasury inquiry, 13 May 2015, p. 3.

[69].              Institute of Public Accountants, Submission, Treasury inquiry, May 2015, p. 6.

[70].              Kaplan Professional, Submission, Treasury inquiry, p. 3.

[71].              SMSF Association, Submission, Treasury inquiry, 12 May 2015, p. 3.

[72].              BT Financial Group, Submission, Treasury inquiry, 7 May 2015, p. 7.

[73].              Corporations Act, proposed section 1546A.

[74].              Corporations Act, proposed subsection 1546B(1).

[75].              Corporations Act, proposed subsection 1546B(3).

[76].              Corporations Act, proposed subsection 921U(2).

[77].              Corporations Act, proposed section 921E.

[78].              PJCCFS, Inquiry into proposals to lift the professional, ethical and education standards in the financial services industry, op. cit., p. 65.

[79].              Estplan, Submission, Treasury inquiry, pp. 1–2.

[80].              According to section 19 A of the Acts Interpretation Act 1901, where an act refers to a Department without identifying the Department then the reference is to the Department that is administered by the Minister in relation to the relevant matter. In this case the Department is Treasury.

[81].              Corporations Act, proposed subsection 921U(6).

[82].              Corporations Act, proposed subsection 921U(7).

[83].              Corporations Act, proposed subsections 921U(2) and (6).

[84].              Senate Standing Committee for the Scrutiny of Bills, Alert digest, 10, 2016, op. cit., p. 4.

[85].              Ibid., p. 5.

[86].              A Henry VIII clause is a provision in an enabling statute that provides that delegated legislation made pursuant to it overrides earlier statutes or the enabling statute itself in the event of an inconsistency. Source: Butterworths concise Australian legal dictionary, 3rd edition, LexisNexis Butterworths, Australia, 2004, p. 199.

[87].              Senate Standing Committee for the Scrutiny of Bills, Alert digest, 10, 2016, op. cit., p. 5.

[88].              Corporations Act, proposed subsections 921G(7) and (4) respectively.

[89].              Corporations Act, proposed subsection 921H(1).

[90].              Corporations Act, proposed subsection 921H(2).

[91].              Corporations Act, proposed subsection 921K(2).

[92].              Corporations Act, proposed subsections 921K(4) and (5).

[93].              Corporations Act, proposed section 921P. A person who is a monitoring body commits an offence if the scheme is not publicly available. The maximum penalty is 10 penalty units which is equivalent to $1,800.

[94].              Corporations Act, proposed subsections 921K(7) and (9).

[95].              Corporations Act, proposed subsections 921R(1) and (2).

[96].              Corporations Act, proposed subsections 921R((3), 4) and (5).

[97].              Corporations Act, proposed subsections 921R(6).

[98].              Corporations Act, proposed section 921S.

[99].              Corporations Act, proposed section 922D.

[100].              Corporations Act, proposed section 921J.

[101].              Corporations Act, proposed subsection 921G(3).

[102].              Corporations Act, proposed subsections 921L(1) and (2). It is an offence for a person who is a monitoring body to fail to notify the relevant provider of its investigation. The maximum penalty is 10 penalty units which is equivalent to $1,800: proposed subsection 921M(1).

[103].              Corporations Act, proposed subsection 921L(3).

[104].              Corporations Act, proposed subsection 921M(2). The maximum penalty is 10 penalty units which is equivalent to $1,800.

[105].              Corporations Act, proposed subsection 921L(5). It is an offence for a person who is a monitoring body to fail to make the required determination. The maximum penalty is 10 penalty units which is equivalent to $1,800: proposed subsection 921M(1).

[106].              Corporations Act, proposed subsection 921M(3). The maximum penalty is 10 penalty units which is equivalent to $1,800.

[107].              Corporations Act, proposed subsection 921L(7).

[108].              Corporations Act, proposed section 921N.

[109].              PJCCFS, Inquiry into proposals to lift the professional, ethical and education standards in the financial services industry, op. cit., p. 26.

[110].              ASIC, ‘AFS licensees: financial advisers register’, ASIC website.

[111].              PJCCFS, Inquiry into proposals to lift the professional, ethical and education standards in the financial services industry, op. cit., recommendation 5, pp. 29–30.

[112].              Corporations Act, proposed subsections 922Q(1) and (2).

[113].              Corporations Act, proposed paragraphs 922Q(2)(a) and (b).

[114].              Corporations Act, proposed paragraph 922Q(2)(e).

[115].              Corporations Act, proposed paragraph 922Q(2)(i).

[116].              Corporations Act, proposed paragraph 922Q(2)(n).

[117].              Corporations Act, proposed paragraph 922Q(2)(o).

[118].              Corporations Act, proposed paragraph 922Q(2)(p).

[119].              Corporations Act, proposed subparagraph 922Q(2)(u)(i).

[120].              Corporations Act, proposed paragraph 922Q(2)(v).

[121].              Corporations Act, proposed sections 922E and 922F.

[122].              Corporations Act, proposed section 922G.

[123].              Corporations Act, proposed sections 922H–922HB and 922HD–922L.

[124].              Corporations Act, proposed section 922M.

[125].              Corporations Act, subsection 766B(1).

[126].              Corporations Act, subsection 766B(3).

[127].              Corporations Act, subsection 766B(4).

[128].              PJCCFS, Inquiry into proposals to lift the professional, ethical and education standards in the financial services industry, op. cit., p. 19.

[129].              Ibid., recommendation 4, p. 26.

[130].              Item 1 of the Bill inserts the term limited-service time-sharing adviser into section 910A of the Corporation Act. A person is a limited-service time-sharing adviser if the person is a relevant provider, the only relevant financial product that the person provides advice about is a time-sharing scheme and the person has not met any one or more of the education and training standards.

[131].              Corporations Act, proposed subsection 923C(2).

[132].              Corporations Act, Schedule 3, proposed table items 269AAA and 269AAB.

[133].              Corporations Act, proposed subsection 923C(3).

[134].              Corporations Act, proposed subsection 923C(5).

[135].              Senate Standing Committee for the Scrutiny of Bills, Alert digest, 10, 2016, op. cit., pp. 7, 8.

[136].              Industry Super Australia and Australian Institute of Superannuation Trustees, Submission, Treasury inquiry, 7 May 2015, p. 10.

[137].              Pajeska Group Pty Ltd, Submission, Treasury inquiry, 7 May 2015.

[138].              SMSF Association, Submission, Treasury inquiry, 12 May 2015, p. 29.

[139].              Tax Agent Services Act, Division 60, Part 6.

[140].              B Pulle, Tax Agent Services Bill 2008, Bills digest, 64, 2008–2009, Parliamentary Library, Canberra, 2008, p. 5.

[141].              Explanatory Memorandum, Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016, p. 44.

[142].              Items 22 and 23 of the Bill insert proposed subparagraphs 60-125(8)(c)(v) and 60-125(8)(d)(iv) into the Tax Agent Services Act respectively.

[143].              Item 24 of the Bill inserts proposed section 70-34 into the Tax Agent Services Act.

[144].              Item 25 of the Bill inserts proposed subsection 70-40(3AA) into the Tax Agent Services Act.