Thinking | 4 October 2012

Grandfathering under FOFA extended to platform operators

The Future of Financial Advice reforms to the Corporations Act 2001 (the Act) implemented a ban on conflicted remuneration for Australian financial services licensees and authorised representatives that will apply from 1 July 2013 (unless the licensee or authorised representative opts in earlier). However, arrangements entered into before that ‘application day’ will be ‘grandfathered’ with the effect that any benefit given under such an arrangement, even if given after the application day, will not constitute conflicted remuneration.

Benefits given by platform operators were initially excluded from the grandfathering arrangements in section 1528 of the Act. Platform operators had been lobbying the Government to change this position before 1 July 2013, given the significant adverse effect the reforms will have on the existing business arrangements that many platform operators have with their clients.

Corporations Amendment Regulation 2012 (No. 8), which was registered on 2 October 2012, extends the operation of the grandfathering provisions of the Act to platform operators. The effect of the regulations is to implement the same grandfathering arrangements for benefits given by a platform operator as are already in place for benefits given by persons other than platform operators under section 1528 of the Act. This means that benefits given by any person, including a platform operator, under any arrangement entered into before the application day will not be subject to the ban on conflicted remuneration. All benefits given under any arrangement entered into on or after the application day will be subject to the ban.

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Adrian Verdnik

Adrian’s financial services law practice covers superannuation, managed funds, insurance, and financial advice.

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