New Inquiry into Financial Products & Services and the new regulatory regime for Margin Lending

• the role of financial advisers
• the general regulatory environment for these products and services
• the role played by commission arrangements relating to product sales and advice, including the potential for conflicts of interest, the need for appropriate disclosure, and remuneration models for financial advisers
• the role played by marketing and advertising campaigns
• the adequacy of licensing arrangements for those who sold the products and services
• the appropriateness of information and advice provided to consumers considering investing in those products and services, and how the interests of consumers can best be served
• consumer education and understanding of these financial products and services
• the adequacy of professional indemnity insurance arrangements for those who sold the products and services, and the impact on consumers and
• the need for any legislative or regulatory change.

• given the current Global Financial Crisis and the recent collapses of high profile companies it was very important to ensure that the regulatory regime and regulator were adequately equipped to ensure that Australian investors have confidence in financial products and services
• the Committee is concerned that some operators may not be meeting their obligations or that the regulatory environment is not sufficient to deal with the number and type of financial services and products that exist
• potential conflicts of interest exist in some financial products and the associated advisory services. In many cases, providers own or control distribution with various types of “incentives” such as commissions, rebates, shelf fees or complex fee structures and
• a further issue is that current law only requires an adviser to “know the client” rather than to know what is in the “best interests of the client”. This creates difficulty in making fully informed decisions and providing effective competition.

Margin Lending

• adding margin loans as a “financial product” under Chapter 7 of the Corporations Act
• dramatically increasing the levels of simple, plain-English consumer disclosure, including the compulsory disclosure of commissions
• imposing a tough responsible lending obligation on all margin lenders and
• boosting consumer protections and options for redress by requiring margin lenders to be licensed and properly trained and members of a external disputes body.