Thinking | 8 July 2013

FoFA grandfathering locked in but modified

On 28 June 2013, the long awaited Corporations Amendment Regulations 2013 (No.5) (Amending Regulations) were registered. The Amending Regulations amend the transitional and grandfathering arrangements relating to the ban on conflicted remuneration contained in Parts 7.7A and 10.18 of the Corporations Act 2001 (Corporations Act).

Background

Under the conflicted remuneration provisions in the Corporations Act, the payment of any benefits which influence or could reasonably be expected to influence financial advice (i.e. conflicted remuneration) given by a financial services licensee or its representatives is generally prohibited. Strict penalties apply to both product issuers who provide, and financial advisers who receive, conflicted remuneration.

At the time the legislation was enacted, it was considered that, in order to protect the value of existing financial advisory businesses, certain benefits in respect of existing and new clients would be grandfathered where the financial adviser and the product issuer had entered into arrangements for the payment of such benefits before 1 July 2013.

The Government subsequently considered this position to be excessively generous and proposed in March 2013 to introduce the Amending Regulations which will effectively introduce a sunset date of 1 July 2014 on most types of grandfathering.

Grandfathering and exemptions – the final position

The Amending Regulations implement a number of grandfathering and transitional amendments which were initially released in the exposure draft of the Amending Regulations in March 2013. The Amending Regulations also implement a number of additional transitional, grandfathering and exemption changes not contemplated in the exposure draft.

These key provisions of the Amending Regulations are summarised below.

 

 

CourtChanges to Court Procedure
Timeframe for Changes
Contact Information
Date
All Jurisdictions Anyone required to self-isolate MUST NOT attend the Court precinct. All Court visitors are to adhere to the various state and territory health guidelines, and at all times follow the instructions of Court staff. In effect from 18 March 2020 indefinitely 19/03/2020
Federal Jurisdiction
19/03/2020
High Court of Australia The High Court of Australia will not sit during April, May or June. It will continue to deliver judgments and deal with special leave applications and hearings by videolink. In effect from 18 March 2020 indefinitely Court Website: https://www.hcourt.gov.au/
19/03/2020
Federal Court of Australia The Federal Court building has been closed. The Court has vacated all listings for in person appearance up to 30 June 2020.
The Federal Court will contact parties with listed hearings up to 30 June 2020 directly to confirm new arrangements.
In effect from 18 March 2020 to 30 June 2020 Court Website: https://www.fedcourt.gov.au/
19/03/2020
NSW Jurisdictions
19/03/2020
NSW Supreme Court Court Registrar’s Lists will be conducted by Online Court where available, or by telephone link. Contentious matters will be conducted by Online Court or videolink.
Judges’ Lists will be conducted in the same approach, subject to specific directions given by the judge administering the list.
In effect from 23 Mach 2020 indefinitely Court Website: http://www.supremecourt.justice.nsw.gov.au/
Virtual Courtroom information: http://www.supremecourt.justice.nsw.gov.au/Documents/Home%20Page/Announcements/Fact%20Sheet%20-%20Practitioners.pdf
19/03/2020
NSW District Court Judges’ Lists will be managed by interval sittings. Parties must only attend John Maddison Tower for their listing at the allocated time. Parties must not enter the Courtroom allocated for the listing until the matter is called.
General List managed by the Judicial Registrar in Court 7D will be conducted by Online Court. If Online Court is not available for the matter, it will be conducted by telephone directions.

Motions Lists managed by Assistant Registrars will be conducted by Online Court. Where Online Court is not suitable, by attending Court 4A at the allocated time.
In effect from 18 March 2020 indefinitely Court Website: http://www.districtcourt.justice.nsw.gov.au/
To attend a listing by telephone, dial the number and use the PIN at the time allocated for the listing

Dial: 1800 062 923

PIN: 7762 8770 9768
19/03/2020
NSW Local Court Notices of Motion and the Review List will be conducted by teleconference.
The Local Court has set aside the month of October 2020 to catch up with a backlog that builds up under these arrangements.
In effect from 18 March 2020 indefinitely Court Website: http://www.localcourt.justice.nsw.gov.au/19/03/2020
NSW Civil and Administrative Tribunal (NCAT) Directions, Conciliation conferences and most interlocutory proceedings will be conducted where possible by phone or AVL. Precise arrangements will be provided separately.
Consumer and Commercial Division Group Lists with multiple parties will be reorganised to reduce the need for parties to attend.
From 23 March 2020, all Group lists are suspended until further notice.
In effect from 18 March 2020 indefinitely
Additional precautions in effect from 23 March 2020 indefinitely
Court Website: https://www.ncat.nsw.gov.au/19/03/2020
ACT Jurisdictions19/03/2020
ACT Supreme Court All Registrar and Deputy Registrar Lists will be conducted by teleconference or videolink. Further information will be provided to legal representatives and parties.
If compulsory attendance is required, and you are required to self-isolate, contact the Registry team in advance of the hearing to make alternative arrangements.

Civil Directions Hearings will be heard by videolink or teleconference.
In effect from 17 March 2020 indefinitely Court Website: https://www.courts.act.gov.au/supreme
sclisting@courts.act.gov.au or (02) 6205 0000 at least one business day prior to listing to make arrangements

scregistrar@courts.gov.au
19/03/2020
ACT Magistrates CourtAll Listings Hearings, Civil Directions, Civil Settlements, Civil noncompliance and Return of Subpoenas will be conducted by telephone or videolink. In effect from 17 March 2020 indefinitely Court Website: https://www.courts.act.gov.au/magistrates/home
mclistings@courts.act.gov.au or (02) 6205 0000 at least one business day prior to make arrangements

mcregistrar@courts.act.gov.au
19/03/2020
SA Jurisdictions19/03/2020
SA Supreme Court Before Masters: All directions hearings will be conducted by email. All arguments will be dealt with on the papers by email. All communications must be received by the Court before the scheduled time and date of the hearing. Records of Outcomes will be sent by email to parties.
Settlement conferences should be held by telephone or another agreed method. The Court will then hold a (by email) directions meeting to be advised of the result and issue further orders.

Before Justices: Follow the instructions given by individual chambers.
In effect from 17 March 2020 to 9 April 2020.
An update will be provided by 27 March 2020.
Court Website: http://www.courts.sa.gov.au/Pages/default.aspx19/03/2020
SA District Court Before Masters: All non-contentious matters will be conducted by email. All emails are to be received by chambers before the close of business the day before the hearing. If parties cannot agree to consent orders, they will attend court and follow social distancing protocols.
No documents are to be handed up in court. All documents should be sent to chambers before the hearing.

Settlement conferences are to be held at an alternative venue. The Court will then hold a (by email) directions meeting to be advised of the result and issue further orders.

Before Judges: Follow the instructions given by individual chambers.
In effect from 18 March 2020 to 9 April 2020.
An update will be provided by 2 April 2020.
Court Website: http://www.courts.sa.gov.au/Pages/default.aspx19/03/2020
Victorian Jurisdictions19/03/2020
Victorian Supreme Court No changes to procedure yet. Court Website: https://www.supremecourt.vic.gov.au/19/03/2020
Victorian Country CourtNo confirmed changes in procedure. If you have been impacted by COVID-19, please call the relevant phone number. Court Website: https://www.countycourt.vic.gov.au/
Common Law Division: 03 8636 6515

Commercial Division: 03 8636 6690
19/03/2020
Victorian Magistrates’ CourtThe Court continues to remain open and operational. AVL technology will be used to limit in-person appearances, as will telephone appearances where appropriate
Matters may be adjourned outside of the usual protocols at the discretion of Magistrates, Judicial Registrars and Registrars.
In effect from 18 March 2020 indefinitelyCourt Website: https://www.mcv.vic.gov.au/19/03/2020
Victorian Civil and Administrative Tribunal (VCAT) VCAT has closed its venues to the public. No face-to-face hearings have been scheduled, and all non-critical matters are adjourned for the foreseeable future.
Some matters will be held by telephone. In this event, the Tribunal will contact parties.
In effect from 17 March 2020 indefinitely Court Website: https://www.vcat.vic.gov.au/19/03/2020
Tasmanian Jurisdictions19/03/2020
Tasmanian Supreme CourtNo change to procedures for Civil cases yet. Court Website: https://www.supremecourt.tas.gov.au/19/03/2020
Tasmanian District CourtNo changes to procedure yet. Court Website: https://www.magistratescourt.tas.gov.au/
19/03/2020
WA Jurisdictions
19/03/2020
WA Supreme Court The Court remains open, except the Court of Appeal. All documents are to be filed electronically.
Case Management and Directions hearings will be conducted by telephone.
Parties are to continue to attend civil trials in person. If the trial cannot be held under the circumstances of social distancing, it will be vacated. The Registry has been closed to the public with all documents to be filed electronically.

No new mediations will be listed until 31 May 2020. Personal attendance at mediation hearings is not required, subject to individual judicial officers. Arrangements will be made for appearances by telephone.
In effect from 19 March 2020 indefinitely.


Updates of mediation to be provided before 1 May 2020.
Court Website: https://www.supremecourt.wa.gov.au/19/03/2020
WA District Court The Court remains open. All documents are to be filed electronically.
Parties are to appear at a pre-trial conference unless it is agreed that all parties attend the pre-trial conference at another venue to be agreed outside of the Court.
In effect from 17 March 2020 indefinitely Court Website: https://www.districtcourt.wa.gov.au/default.aspx19/03/2020
WA Magistrates Court No changes to procedure yet. Court Website: https://www.magistratescourt.wa.gov.au/default.aspx19/03/2020
Queensland Jurisdictions19/03/2020
Queensland Supreme Court No changes to procedure for Civil cases yet. Court Website: https://www.courts.qld.gov.au/19/03/2020
Queensland District CourtThe Court remains open and operational. All civil applications will be staggered at half-hourly intervals, starting at 9:30am. In effect from 23 March 2020 indefinitely Court Website: https://www.courts.qld.gov.au/19/03/2020
Queensland Magistrates Court Brisbane Magistrates Court: All callovers will be conducted on the papers, without appearances from legal representatives with matters adjourned for three months from the date of listing.
All matters currently listed for hearing will be adjourned on the papers subject to any application to hear a matter by telephone or other electronic means.
In effect from 18 March 2020 indefinitely Court Website: https://www.courts.qld.gov.au/19/03/2020

 

 

Comments

While the Amending Regulations have been drafted to cover a wide variety of situations in which conflicted remuneration would be grandfathered or exempt, the provisions of the Amending Regulations are themselves complex and in certain circumstances, open to different interpretation. However, the clear intention is to harmonise the application of grandfathering as between platform providers and non-platform operators. The explanatory statement also makes it clear that grandfathering is not intended to apply if a client is investing in a completely different scheme, product or offering, on or after 1 July 2014.

Practical issues for consideration by platform operators, product issuers and financial advisers include:

  • Whether the non-platform grandfathering applies if a particular financial product had not been offered before 1 July 2013?
  • Whether the platform and non-platform grandfathering applies to both upfront benefits (such as upfront rebates and commissions) as well as ongoing benefits (such as trailing commissions)?
  • How much an existing arrangement between platform operators or product issuers and financial advisers can change before grandfathering ceases to be available?
  • If a financial product offered under a multi-product offer PDS ceases to be offered under that document, will grandfathering continue to apply?

Contact

Related practices

You might be also interested in...

Financial Services | 14 Jun 2013

Registered scheme constitutions – updated RG 134 released

ASIC has released updated Regulatory Guide 134 (Managed investments: Constitutions) (RG134) which sets out ASIC guidance in relation to the content requirements for registered scheme constitutions.

Financial Services | 6 Jun 2013

New financial services licensing regime for accountants

The Corporations Amendment Regulations that implement the new limited financial services licence regime for accountants were registered on 4 June 2013.