The Government has released the exposure draft and Explanatory Memorandum of the Corporations Amendment (Further Future of Financial Advice Measures) Bill 2011 for the second and final tranche of draft legislation on the FOFA reforms for public comment. ( See details of tranche 1 here) The second tranche of the legislation covers the provisions relating to: a ban on conflicted remuneration (including product commissions), where licensees or their representatives provide financial product advice to retail clients; a ban on volume-based shelf-space fees from asset managers or product issuers to platform operators; and a ban on asset-based fees on geared funds. It is due to commence on 1 July 2012. The ban on conflicted remuneration includes a ban on both monetary and non-monetary (soft-dollar) benefits. In relation to monetary benefits, the ban on conflicted remuneration does not apply to: • General insurance; • Life insurance which is not bundled with a superannuation product; • Individual life policies which are not connected with a default superannuation fund; and • Execution-only (non-advice) services. In relation to non-monetary benefits, the ban on conflicted remuneration does not apply to: • General insurance; • Benefits under the amount prescribed in regulation (proposed to be $300), so long as those benefits are not identical or similar and provided on a frequent or regular basis; • The benefit is for the purposes of genuine professional development or administrative IT services and meets the criteria prescribed in the regulations; and • Execution-only (non-advice) services. The Bill contains an anti-avoidance provision: a person must not, either alone or together with one or more other persons enter into a scheme if it would be concluded that the person entered into the scheme for the sole or dominant purpose of avoiding the application of any provision in the Bill, provided the scheme has or would achieve that purpose.
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