21 March, 2019
The Corporations Amendment (Professional Standards of Financial Advisers) Act 2017 commenced on 15 March 2017 and introduced several measures to the Corporations Act 2001 to raise the education, training and ethical standards of financial advisers providing personal advice to retail clients on more complex financial products.
Summary of reforms
From 1 January 2019, new professional standards requirements for financial advisers will progressively replace training standards in Regulatory Guide 146 Licensing: Training of financial product advisers (RG 146).
Only financial advisers who were authorised at any time between 1 January 2016 and 1 January 2019 and not prohibited from providing advice on 1 January 2019, will be recognised as an 'existing provider'. Financial advisers can demonstrate they are an 'existing provider' if they:
- (i) have a 'current' status on the Financial Advisers Register at any time in this period; and
- (ii) are not banned, disqualified or subject to an enforceable undertaking on 1 January 2019.
Otherwise, financial advisers will be treated as 'new entrants' to the industry and RG 146 will not apply to new entrants to the industry seeking to become relevant providers after 1 January 2019. However, RG 146 will continue to apply to existing providers until the new requirements are applicable.
Who do the reforms apply to?
The reforms apply to 'relevant providers' who are individuals that are:
- an Australian financial services (AFS) licensee, an authorised representative, employee or director of an AFS licensee, or an employee or director of a related body corporate of an AFS licensee; and
- authorised to provide personal advice to retail clients, as the AFS licensee or on behalf of the AFS licensee, in relation to relevant financial products (i.e. financial products other than basic banking products, general insurance products, consumer credit insurance and any combination of those products).
Obligations for relevant providers
All relevant providers are now required to:
- have a relevant bachelor or higher degree, or equivalent qualification;
- pass an exam;
- meet continuing professional development (CPD) requirements each year;
- complete a year of work and training (professional year) (but not applicable to individuals who are already relevant providers before 1 January 2019); and
- comply with a code of ethics and be covered by a compliance scheme that monitors and enforces compliance with the code of ethics
Only relevant providers who meet the above standards can be called 'financial advisers' or 'financial planners' or similar terms.
Phasing in commencement of reforms
There will be a phased approach to the commencement of these reforms with the commencement dates for the key requirements set out in the below table.
| Requirement | Commencement date for new relevant providers (authorised on or after 1 January 2019) | Start date for existing relevant providers (authorised between 1 January 2016 and 1 January 2019 |
|---|---|---|
| Hold relevant bachelor degree or higher or equivalent qualification | 1 January 2019 | 1 January 2024 |
| Pass Exam | 1 January 2019 | 1 January 2024 |
| Professional year completion | 1 January 2019 | Not applicable |
| Compliance with CPD requirements | 1 January 2019 (but not applicable in professional year) | 1 January 2019 |
| Compliance with code of ethics | 1 January 2020 | |
| Be covered by a compliance scheme | 1 January 2020 (compliance scheme notifications to be received from 15 November 2019) | |
Other relevant information
- Financial Adviser Standards and Ethics Authority – All the obligations that relevant providers need to meet under the new requirements will be approved and developed by an independent standards body – Financial Adviser Standards and Ethics Authority (FASEA).
- Compliance Schemes for the code of ethics – Monitoring bodies will operate compliance schemes to monitor and enforce relevant providers' compliance with the code of ethics. An AFS licensee, or an associate of an AFS licensee, cannot be a monitoring body.
- Updates to the financial advisers register – Updates to include any information that ASIC believes should be included relevant to the provision of financial services by the relevant provider. AFS licensees will be required to give the additional information to ASIC.
Present obligations of a licensee – Record Keeping
Despite the changes in timing for giving information to ASIC, a licensee will still be required to maintain appropriate records about the provisional relevant provider (e.g. name, product authorisations and when their professional year commenced). A licensee will also still be required to comply with CPD requirements from 1 January 2019 and maintain appropriate records (e.g. the start date of the CPD year).
It is important that licensee's maintain appropriate records because between 15 November 2019 and 31 December 2019, licensees will be required to give ASIC information about a provisional relevant provider they authorised between 1 January 2019 and 14 November 2019.
What licensees DO NOT need to do until 15 November 2019
- Lodge a form notifying ASIC regarding the appointment of a provisional relevant provider.
- Advise ASIC in relation to:
- the start date of their CPD Year;
- failure(s) by their relevant providers to comply with CPD requirements; and
- existing advisers that have passed the exam.
For further information, please contact:
Bill Fuggle, Partner, Baker & McKenzie
bill.fuggle@bakermckenzie.com
