Thinking | 29 June 2012
On 23 June 2012 the Minister for Financial Services and Superannuation, Bill Shorten, announced that the Gillard Government intends to introduce a limited Australian financial services licence (AFSL) for accountants. The licence will eventually replace the “Accountants’ Exemption” that excludes accountants from requiring an AFSL for the provision of certain financial services to self managed superannuation funds, and will allow for a roader range of advice to be provided than is currently permitted under the Exemption.
This announcement follows more than 2 years of negotiations between the Government and the professional accounting bodies, including the Institute of Chartered Accountants, CPA Australia and the National Institute of Accountants. It also coincides with the passage of the substantial Future of Financial Advice (FoFA) reforms by the Senate on Wednesday 20 June 2012. The FoFA legislation regulates the way in which fees can be collected and disclosed by the financial services and advice industry.
The limited AFSL will allow accountants to give broader financial advice on self-managed superannuation funds and class of product advice about:
- general and life insurance
- simple managed investment schemes and
- basic deposit products.
Class of financial product advice is financial advice that does not make a recommendation (in form or substance) about a specific financial product. Accordingly, the accountant’s AFSL will not allow accountants to make ‘specific product’ recommendations. The purpose of the AFSL is to allow accountants to provide strategic and low-cost financial advice to their clients about their wealth and investments, especially in rural and regional areas where it may be difficult to access fully licensed financial advisors.
Minister Shorten also announced that a streamlined transition period between 1 July 2013 and 1 July 2016 will be available for accountants who hold a public practice certificate from the CPA, ICAA or the IPA. After 1 July 2016, accountants seeking to obtain an AFSL will be required to satisfy the same experience requirements as any other AFSL applicant.
Accountants that rely on the streamlined process will need to undergo a knowledge update review at the end of three years to ensure their skills are up to date.
Holders of an accountant’s AFSL will:
- be able to lodge an annual compliance certificate rather than the annual audit required for current AFSL holders and
- otherwise be required to comply with all of the other licensing, conduct and advice requirements to which financial advice providers are subject (including FoFA).
Public consultation on draft regulations will commence in the second half of this year. It is expected that up to 10,000 accountants will apply for an AFSL, it is a feature of the announcement that compliance with the AFSL is not intended to be onerous for members of a recognised professional accounting body.
Hall & Wilcox has extensive experience obtaining Australian financial services licences for a variety of clients who need an AFSL under the Corporations Act 2001 to provide financial advice and other financial services. We will be monitoring the progress of this announcement and inform you of any significant updates.
In the interim, please contact a member of the Financial Services or Tax team to discuss your circumstances.
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