Bills Digest No. 120, 2012–13

28 May 2013

Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013

Robert Dolamore
Economics Section 

The Bills Digest at a glance

Purpose of the Bill

·         The Bill seeks to reduce the regulatory burden of companies offering relatively simple (or ‘vanilla’) corporate bonds to retail investors.

·         The Bill also aims to strengthen consumer protection and increase investor confidence by defining and restricting the use of the terms ‘financial planner’ and ‘financial adviser’ and terms of like import.

Structure of the Bill

·         The Bill is structured into two schedules with the first dealing with facilitating the development of the retail corporate bond market and the second defining and restricting the use of the terms ‘financial planner’ and ‘financial adviser’.

Background

·         In December 2010 the Government signalled that as part of its Competitive and Sustainable Banking System initiative it would be introducing changes to facilitate the development of a deeper and more liquid corporate bond market in Australia. This included reducing the regulatory burden associated with issuing corporate bonds to retail investors.

·         In March 2012 during Parliamentary debate on the Future of Financial Advice reforms (FOFA) the Government announced it would be enshrining the terms ‘financial planner’ and ‘financial adviser’ into law.

Stakeholder views

·         There is broad support among major interest groups for reducing the regulatory burden of issuing simple corporate bonds to retail investors.

·         There is also broad support for defining and restricting the use of the terms ‘financial planner’ and ‘financial adviser’ and terms of like import.

Key issues

·         The key issue in relation to the measures in Schedule 1 of the Bill is whether they strike the right balance between reducing the cost to companies of complying with regulatory requirements and ensuring retail investors are adequately protected.

·         In relation to the measures in Schedule 2 of the Bill, concerns have been raised as to whether both the terms ‘financial planner’ and ‘financial adviser’ should be enshrined in law or whether it would be better to only define and restrict the use of the term ‘financial planner’.

·         Further, in relation to the changes in Schedule 2 of the Bill concerns have also been raised about the lack of a transition period for the industry to adjust its current practices.

Date introduced: 20 March 2013

House: House of Representatives

Portfolio: Treasury

Commencement: Sections 1-3 on Royal Assent; Schedule 1 on the earlier of a day fixed by Proclamation, or the day after six months after Royal Assent; and Schedule 2 on the later of 1 July 2013, or the day after Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose of the Bill

The purpose of the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013 (the Bill) is to amend the Corporations Act 2001 (Corporations Act)[1] to:

·         reduce the regulatory burden of companies offering relatively simple (or ‘vanilla’) retail corporate bonds to retail investors and

·         strengthen consumer protection and increase investor confidence by defining and restricting the use of the terms ‘financial planner’ and ‘financial adviser’ and terms of like import.

Structure of the Bill

The Bill is structured into two Schedules, which will be dealt with separately within this Bills Digest:

·         Schedule 1 amends the Corporations Act to facilitate improved trading of retail corporate bonds in Australia and

·         Schedule 2 amends the Corporations Act to define and restrict the use of the terms ‘financial planner’ and ‘financial adviser’.

Committee consideration

When it met on 20-21 March 2013, the House of Representatives Selection Committee referred the Bill to the Joint Committee on Corporations and Financial Services (JCCFS)[2] for inquiry and report by 15 May 2013.[3]

The Senate Selection of Bills Committee resolved not to refer this Bill for inquiry and report.[4]

Corporations and Financial Services Committee

The JCCFS reported on 15 May 2013 and recommended that the Bill be passed.[5] During the course of its inquiry, the committee received 15 submissions from interested parties and conducted a public hearing in Sydney on 22 April 2013. Further information about the representations made by key interest groups to the Committee is provided in the ‘Position of major interest groups’ and ‘Key issues and provisions’ sections below.

The JCCFS’s report includes some additional comments and recommendations by Coalition members of the Committee (see pages 55-61 of the report). This additional commentary relates mostly to the issues raised by Schedule 2 of the Bill.

Schedule 1—Measures to facilitate trading in retail corporate bonds

The JCCFS considered that the key changes proposed by Schedule 1 of the Bill will encourage the development of a deeper market for simple corporate bonds.[6] This includes introducing a mandatory two-part prospectus regime for simple corporate bonds, facilitating the trading of simple corporate bonds using depository interests and removing deemed civil liability for misleading and deceptive statements in a disclosure document.

However, the Committee noted that the challenge of developing a market for these securities will depend on there being investor demand. It considered that generating this demand will rely on ‘educating retail investors as to the features of simple corporate bonds and offering a product that genuinely meets the needs and risk profile of investors’.[7]

In relation to Schedule 1 of the Bill the Committee recommended that Treasury amend the Explanatory Memorandum to clarify that the proposed changes in relation to the ‘reasonable steps’ defence available to company directors applies across the entire Corporations Act to offers of all securities (see the ‘Key issues and provisions’ section below).[8]

In their supplementary comments, the Coalition members of the Committee indicated the Coalition strongly supports efforts to establish a deep and liquid corporate bond market. They recommended the Bill be supported in relation to the corporate bonds-related measures.[9]

Schedule 2—Restricting the use of the terms ‘financial planner’ and ‘financial adviser’

In relation to the proposal to enshrine in law the use of the terms ‘financial planner’ and ‘financial adviser’ the JCCFS stated that:

While the amendments regarding use of the terms ‘financial planner’ and ‘financial adviser’ by those offering personal financial advice are welcome and should ensure that those persons are operating under a relevant licence, the amendments will only work as part of the broader package of FOFA [Future of Financial Advice] reforms that address issues of conflicted remuneration and acting in the best interest of the client.[10]

The Committee made two recommendations in relation to Schedule 2 of the Bill. First, to address concerns about the timeframe for the commencement of penalties, the Committee recommended that the Australian Securities and Investment Commission (ASIC) consult with key stakeholders in the financial advice sector to implement a grace period to ensure that in the short-term passive breaches of the new provision will not be prosecuted.[11] Further the Committee recommended that ASIC should engage with the financial advice sector to discuss the time that practitioners will need to ensure that signage is changed.

Second, the Committee recommended that ASIC sets out on its MoneySmart website the changes that the Bill makes to inform consumers about what they can expect when they receive a service from a ‘financial planner’ or a ‘financial adviser’.[12]

The Coalition members of the Committee recommended that while the enshrinement in law of the use of the terms ‘financial planner’ and ‘financial adviser’ not be opposed there should be a clear indication that any consequent incremental increases in related financial services red tape be resisted in future.[13]

Further, the Coalition members recommended the Government review the drafting of Schedule 2 to ensure the changes in relation to the use of the terms ‘financial planner’ and ‘financial adviser’ do not prevent the current legitimate use of those terms by businesses involved in financial services unrelated to personal financial advice.[14]

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills has commented on the Bill and sought advice from the Minister on two matters where the Bill provides a regulation-making power.[15]

Parliamentary Joint Committee on Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act.[16] The Government considers that the Bill is compatible.

In its report of 15 May 2013, the Committee indicated that it is seeking further information on the compatibility of the measures in this Bill with the right to freedom of expression and the right to be presumed innocent.[17]

The Committee considers that the proposed restrictions on the use of the terms ‘financial planner’ and ‘financial adviser’ and terms of ‘like import’ engage the right to freedom of expression in article 19 of the International Covenant on Civil and Political Rights (ICCPR). While the Committee notes the right to freedom of expression can be subject to permissible limitations under the ICCPR, the statement of compatibility does not address these issues.

The Committee has also raised concerns that the changes proposed in relation to the ‘reasonable steps’ defence appear to involve requiring the person to discharge a reverse legal burden by requiring them to prove the existence (or non-existence) of particular facts to avoid criminal liability. The Committee considers that these provisions may therefore engage the right to be presumed innocent in article 14(2) of the ICCPR. While the Committee notes that reverse burden offences will not necessarily be inconsistent with the presumption of innocence provided certain conditions are satisfied, the statement of compatibility does not address these issues.

The Committee has indicated that before forming a view on the human rights compatibility of the Bill, it intends to write to the Minister for Financial Services and Superannuation to request further information as to:

·         whether the provisions in Schedule 2 of the Bill are compatible with the right to freedom of expression in article 19 of the ICCPR and

·         whether the provisions in items 52 and 53 of the Bill are compatible with the right to be presumed innocent in article 14(2) of the ICCPR.[18]

Financial implications

The Explanatory Memorandum states that this Bill has no financial impact.[19]

Schedule 1—Measures to facilitate trading in retail corporate bonds

Background

In December 2010, as part of its Competitive and Sustainable Banking System initiative, the Government signalled it would be introducing changes to facilitate the development of a deeper and more liquid corporate bond market in Australia.[20] These changes included launching the trading of Commonwealth Government Securities (CGS) on financial markets accessible to retail investors and reducing the regulatory burden associated with issuing corporate bonds to retail investors (including streamlining disclosure requirements and prospectus liability regulations).

The legislation facilitating retail trading of CGS—the Commonwealth Government Securities Legislation Amendment (Retail Trading) Act 2012—commenced on 17 November 2012.[21]

Schedule 1 of this Bill seeks to reduce the complexity and cost of issuing relatively simple (referred to as ‘vanilla’) corporate bonds in the retail market.[22] In the second reading speech for the Bill, the Minister for Financial Services and Superannuation, Bill Shorten, stated that the changes are intended to ‘reduce the regulatory burden on issuers of corporate bonds, while at the same time ensuring that appropriate standards of consumer protection are maintained’.[23]

The Australian corporate bond market

Corporate bonds are a way for companies to obtain funding and an alternative to raising capital in equity markets, borrowing domestically from Authorised Deposit-taking Institutions (ADIs) or borrowing overseas. The Reserve Bank of Australia (RBA) has recently estimated that the face value of the stock of bonds outstanding is around $825 billion—roughly two-thirds of the market capitalisation of Australian Stock Exchange (ASX) listed equities—and equivalent to 62 per cent of gross domestic product (GDP).[24]

The Australian Financial Centre Forum’s[25] report Australia as a Financial Centre: Building on our Strengths (known as the Johnson Review after the Chairman of the review forum, Mark Johnson) found the domestic corporate bond market is a significant weakness in Australia’s financial system, lacking liquidity and diversity.[26] It argued the advantages of Australia developing a more vibrant corporate bond market include the possibility of Australia coming to play a leading role in issuing and managing corporate debt in the Asia-Pacific region and giving Australia’s corporate sector access to more diversified funding sources.

More recently, Assistant Governor (Financial Markets) of the RBA, Guy Debelle, offered a somewhat different perspective, suggesting that Australia’s corporate bond market is not that unusual.[27] He noted the size of Australia’s corporate bond market is similar to that in Europe and the United Kingdom. However, as he observed, this is not to say that the local corporate bond market should not be larger. In his view, the issue appears to be one of price.

In many of the recent discussions about the state of the local market, I have been in the room with both issuers and investors. The issuers say there is not enough demand for their paper. The investors say there is not enough supply. But what actually seems to be going on here is that the bid-ask is too wide. It is basically an issue of price.[28]

Australian corporate bonds are typically issued in the wholesale market—targeting professional and institutional investors—and are traded in markets not directly accessible to retail investors. The current situation is neatly captured by the Australian Centre for Financial Studies:

Increased issuance of corporate bonds in Australia has occurred recently with large issues by companies such as Wesfarmers, BHP Billiton, and Telstra. However, the issues have generally been aimed at institutional investors (who invest in multi-million dollar parcels) and not readily accessible to retail investors. Minimum investments are typically in the order of $500,000. Regulatory requirements associated with the issuance disclosure arrangements limit participants to sophisticated and wholesale/institutional investors. Trading in such securities occurs directly between investors or via brokers in over the counter markets rather than on the ASX.[29]

Indeed, the retail segment of the Australian corporate bond market is quite small. While Australian households had accounted for between one-quarter and one-half of the investor base for corporate bonds up until about the 1980s, today their direct participation in the bond market is less than one per cent of bonds on issue.[30] The RBA attributes this low participation to two main factors:

First, the introduction of compulsory superannuation in the early 1990s has produced a pool of household savings that is invested via the funds management industry rather than directly by households. Second, the disclosure requirements for issuers that raise funds from retail investors mean that it has usually been more cost-effective to raise debt from institutional investors.[31]

Importantly, there is currently no mechanism for parallel trading of corporate bonds in the wholesale and retail markets.

What are the current disclosure and liability requirements?

Under current arrangements, companies issuing simple corporate bonds to retail investors would be required to issue a full prospectus. Treasury has summarised the current situation as follows:

While bonds are a ‘financial product’ for the purposes of the [Corporations] Act , they are specifically excluded from the Part 7.9 financial product disclosure rules (under section 1010A) and are therefore subject to the general prospectus disclosure rules of Chapter 6D. The starting point is that a full prospectus is required (sections 704-706 and 709), akin to an initial public offering document even when the issuer is already listed and therefore already subject to continuous disclosure requirements. The Act contains a number of general and specific requirements regarding matters that must be disclosed in prospectuses (sections 710 and 711). Subsection 715A(1) says that the information in a disclosure document must be worded and presented in a clear, concise and effective manner. While there is no limit on prospectus length, under ASIC Regulatory Guide 228 (at 228.30), prospectuses should be as short as possible, while satisfying the disclosure requirements.[32]

In contrast, it is worth noting that bonds issued to wholesale investors do not require a disclosure document such as a prospectus, as these investors are considered to have sufficient resources and bargaining power to evaluate investments.[33]

It is also the case that the current liability regime adds to the expense of issuing simple corporate bonds because deemed directors’ liability entails a lengthy due diligence process by directors. Treasury has summarised the current situation as follows:

Section 728 of the Corporations Act prohibits a person from offering securities under a disclosure document (for example, a prospectus) if, among other things, there is a misleading or deceptive statement, an omission of required material, or a new circumstance has arisen. It is a criminal offence for the issuer to contravene subsection 728(1) where the misleading or deceptive statement or the omission or new circumstance is materially adverse from the point of view of an investor (subsection 728(3)). However, subsection 728(3) does not extend to directors of the issuer.

Section 729 gives a person who suffers loss or damage because an offer of securities under disclosure documents that contravenes section 728 the right to recover the amount of loss or damage against a certain range of people who are itemised in section 729. These potential defendants include not only the company issuing the securities, but also directors of the security issuer, underwriters, and anyone else who contravenes or is involved in the contravention. Security issuers may be able to take advantage of the due diligence defence under section 731, and other defences contained in sections 732 and 733.[34]

Further, Treasury noted that directors are required to consent to lodgement of a prospectus under Chapter 6D of the Corporations Act, which means they are subject, effectively, to deemed liability for the whole document under sections 1308 and 1309.[35] While directors may be able to fall back on having taken ‘reasonable steps’, there is currently no other defence such as ‘due diligence’ or ‘reasonable reliance’.

The Johnson Review’s proposal in this area

The Johnson Review considered that the Government could do relatively more to facilitate the development of the corporate bond market at the retail, rather than wholesale, level.[36]

To this end, it recommended the Government reduce the regulatory requirements on corporate debt issuance to retail investors.[37] As a general point, the Johnson Review argued the prospectus requirements for listed companies issuing listed debt securities to retail investors should not be more onerous than for the same companies issuing further shares to retail investors.

The Johnson Review envisaged that the exemption from the existing disclosure requirements would apply to those issuers of corporate bonds who have:

·         listed shares and hence are already required to provide continuous disclosure and comply with the market operator’s listing rules and

·         investment grade securities with a reasonably simple structure.[38]

Under the Johnson Review’s proposal, companies which satisfied these criteria would no longer have to issue a detailed prospectus but rather a single shorter document, cross referencing all relevant documents already lodged with ASIC or the market operator. Further, it was envisaged that those companies planning a program of bond issues over time would be able to use a base prospectus with a supplementary prospectus for each new issue.

Policy development

As part of its Competitive and Sustainable Banking System initiative, the Government tasked Treasury ‘to better align disclosure for retail corporate bond issues with the process already allowed for share entitlement offers, which provides a very high level of protection for investors, as well as reduced transaction costs for issuers’.[39]

To progress this work, the Treasurer, Wayne Swan, released a discussion paper on 13 December 2011.[40] The discussion paper canvassed a wide range of issues concerning the potential to reduce disclosure and liability requirements for corporate bonds that are relatively simple and low risk. Specifically, the discussion paper flagged that:

Allowing issuers to issue a shorter prospectus, and reducing the liability requirements for directors, in respect of bonds that are lower risk and less complex, would address the impediments for issuers by reducing the legal and other compliance costs of disclosure and the amount of due diligence required before boards sign off on prospectuses. Shorter, more standardised prospectuses would also assist investors because it will be easier for them to locate the information that they need to know before making an investment decision. Removing directors’ deemed liability (as discussed later in this paper) would not materially reduce investor protection because the company and anyone associated with preparing the prospectus will still be liable.[41]

In response to this consultation process, Treasury received 34 submissions from interested parties, which are available from the Treasury website.[42]

Following consideration of feedback from interested parties, on 11 January 2013, the Treasurer released an Exposure Draft of amendments to the Corporations Act to streamline the regulatory requirements for issuing simple corporate bonds to retail investors.[43] One notable difference from the discussion paper was that, while the discussion paper had flagged the possibility of companies being able to issue a single disclosure document[44] for simple corporate bonds, the Government’s preferred approach, as reflected in the draft Explanatory Memorandum, was to require a streamlined two-part prospectus (consisting of a base document and an offer specific prospectus).[45] This continues to be the case.

What changes are being proposed?

To facilitate the development of the retail corporate bond market this Bill proposes:

·         introducing a mandatory two-part disclosure regime for corporate bonds that qualify as simple corporate bonds

·         changing the civil liability provisions of directors when issuing simple corporate bonds to retail investors under the two-part prospectus regime

·         clarifying the application of defences in respect to misleading and deceptive statements and omissions in disclosure documents relating to simple corporate bonds issued to retail investors and

·         allowing simple corporate bonds in the wholesale market to be offered to retail investors using depository interests (which is a beneficial interest in the simple corporate bond).

What are the likely benefits of the proposed changes?

Facilitating the development of the retail end of the corporate bond market is likely to have a number of benefits. First, it will give investors greater choice and an opportunity to diversify their investment portfolios. Second, it will give companies more choice and flexibility in how they raise their funding. During a public hearing of the JCCFS inquiry into this Bill, the National Australia Bank (NAB) summarised the benefits as follows:

A deeper and more liquid retail corporate bond market has benefits for corporates, business and investors. For corporates, it will broaden their funding sources and help facilitate their growth aspirations. For investors, a fully functioning retail corporate bond market will offer investors more choice and an opportunity to diversity their investments. Facilitating this funding will free up the banks’ balance sheets to continue supporting SMEs [small and medium enterprises], who traditionally do not have the same level of access to capital markets as their larger counterparts.[46]

Similarly, during the same hearing, Treasury stated that:

Australians are relatively active equity investors, but would benefit from being able to diversity into longer term, lower risk and less volatile fixed income streams. With Australians living longer simple corporate bonds provide an appropriate alternative for managing longevity risk, which is of particular interest to SMSF [self-managed superannuation fund] trustees. Growing the retail bond market will help to reduce reliance on offshore wholesale funding markets for raising corporate debt and free-up bank balances for lending to the domestic market, particularly small businesses. Growing this market will also help to educate retail investors and increase the level of competition for retail financial services generally.[47]

Policy position of non-government parties/independents

The Opposition has indicated that it supports the development of a deep and liquid retail corporate bond market in Australia. In a speech to the University of Melbourne Faculty of Business and Economics, the Shadow Minister for Finance, Deregulation and Debt Reduction, Andrew Robb, stated that:

A deep and liquid retail corporate bond market would provide access to capital for Australia corporations, lower risk and less volatile investment options for investors looking for long-term security and predictable income streams, such as self-managed superannuation funds, and create space on bank balance sheets to support Australian businesses, particularly small and medium business.[48]

Further he confirmed that in government, the Coalition would look for ways to stimulate the development of the retail corporate bond market, including by: examining the scope for greater use of short form prospectus; utilising the continuous disclosure regime within the ASX; reviewing the director’s liability for prospectus in line with the Council of Australian Governments (CoAG) review of director’s liability; making it simpler for investors to access the retail corporate bond market; and educating the market.[49]

Position of major interest groups

There is broad support among major interest groups for reducing the regulatory burden of issuing simple corporate bonds to retail investors with a view to facilitating the development of a deeper and more liquid corporate bond market in Australia. Those organisations that have indicated their support include:

·         the Australian Bankers’ Association (ABA) has said that it supports ‘the Government’s commitment to develop a deep and liquid corporate bond market as part of the Governments “Competitive and Sustainable Banking System Package”. A retail corporate bond market offers an important alternative funding source for banks and may result in reduced reliance on offshore markets’[50]

·         the Law Council of Australia (LCA) has indicated that it ‘commends the Government’s efforts to encourage the development of a corporate bond market in Australia which can be effectively accessed by retail investors by reforms aimed at improving the quality of disclosure to retail investors and which remove some of the burden of compliance from issuers’[51]

·         the Association of Superannuation Funds of Australia has stated that it ‘welcomes the Government facilitating the improved trading of retail corporate bonds in Australia by streamlining the regulatory requirements for issuing corporate bonds to retail investors’[52]

·         the Self Managed Superannuation Funds Professionals’ Association has stated that it ‘supports the amendments in Schedule 1 of the Bill to make simple corporate bonds more readily available to retail investors because we believe that this will allow SMSF [self-managed superannuation fund] trustees to better manage their retirement income longevity risk’.[53]

That said, a number of organisations that commented on the Exposure Draft felt that the conditions to qualify as a simple corporate bond were too prescriptive (such as specifying that bonds should have a fixed term of no more than ten years and a face value of no more than $1000).[54] In this regard, it is worth noting that most of the conditions that attracted such comments have been retained in the current Bill.

Key issues and provisions

The provisions in Schedule 1 of this Bill seek to reduce the regulatory burden of companies offering relatively simple corporate bonds to retail investors. In so doing, the Bill tries to strike an appropriate balance between reducing the cost to companies of complying with regulatory requirements and ensuring retail investors are adequately protected. The key ways Schedule 1 of this Bill seeks to protect investors is by limiting the definition of ‘simple corporate bonds’ to those securities that have relatively straight forward terms and conditions and are relatively high quality and low risk debt instruments; and ensuring that investors have enough information about the issuer and the bond issue being considered to make an informed decision.

The Bill seeks to reduce the regulatory burden of companies issuing simple corporate bonds by allowing them to utilise a streamlined two-part prospectus rather than having to provide a full prospectus and by rebalancing the prospectus liability regime that applies to this type of bond offer.

Ultimately, the success of the measures in the Bill, in terms of facilitating the development of the retail corporate bond market, is likely to hinge on whether the measures have sufficiently reduced the cost of issuing simple corporate bonds relative to other sources of funding.

It is also likely that educating retail investors is going to be important to building their confidence in simple corporate bonds as an investment class and increasing demand for these securities. As noted above, in its report the JCCFS observed that generating demand for simple corporate bonds will rely on educating retail investors as to the features of these securities and offering a product which genuinely meets the needs and risk profile of investors.

When is a bond a ‘simple corporate bond’?

Item 22 of Schedule 1 of the Bill inserts proposed sections 713A—713E into the Corporations Act.

Proposed section 713A sets out the conditions an offer of securities[55] must satisfy to be considered an offer of simple corporate bonds and for the securities themselves to be considered simple corporate bonds. In all there are some 15 separate conditions specified in proposed section 713A which must be satisfied. They are summarised on pages 11–14 of the Explanatory Memorandum.[56] Importantly, proposed subsection 713A(2) of the Bill requires that the securities must be debentures.[57]

It is worth noting that several of the conditions attracted comment from interested parties, including the requirements that the:

·         face value of the bond cannot exceed $1000 (proposed subsection 713A(12))

·         term of the bond cannot be more than ten years (proposed subsection 713A(6))

·         fixed margin or fixed interest rate payable on the bond cannot be decreased; and interest payments cannot be deferred or capitalised by the issuer (proposed subsections 713A(9)– (10) and paragraph 713A(11)(c)) and

·         bonds can only be redeemed under certain specified circumstances (proposed subsection 713A(13)).

For example, in its submission to JCCFS, the ABA argued that:

… a maximum tenor limitation of 10 years and a maximum security price of A$1,000 (a condition not required by ASIC Class Order 10/321) are unnecessary and problematic. A range of investment opportunities should be provided to investors and regulation should therefore not dictate the commercial characteristics which affect the marketability of bonds. Restricting the characteristics of bonds able to be issued under the new prospectus rules will unnecessarily dissuade issuers and undermine efforts to build the retail corporate bond market.[58]

Minter Ellison raised concerns in its submission on the Exposure Draft concerning the decision not to allow interest payments to be decreased or deferred:

We have witnessed significant volatility in the interest margins offered by corporate issuers for bonds and hybrid products over the past few years. Based on feedback we have received, an inability to lower the fixed margin or interest is commercially unattractive to corporate issuers, particularly for long dated financial products. In addition, there may be instances where a reduction or deferral of interest payment could be attractive from the perspective of both the issuer and the investor.[59]

Minter Ellison further observed, in relation to the restriction on issuers not being able to redeem bonds except in limited circumstances:

In our opinion, the inability of the issuer to redeem the bonds at its option [except in the circumstances specified in the Bill] is highly restrictive and impedes the issuer’s ability to manage its capital structure efficiently. For example, if a long dated bond with a fixed interest rate is issued during a period of high interest rates and subsequently the market interest rates drop significantly, the issuer would be encumbered with a highly inefficient form of borrowings.[60]

Against this, is the need to ensure that bonds which qualify as simple corporate bonds are not overly complex and are relatively high quality and low risk debt instruments. For example, when asked about the rationale for specifying that the face value of the bond cannot exceed $1000, Treasury stated that:

The rationale for that is to keep the type of bonds which can be offered under this streamlined disclosure regime and with the modifications to the liability of directors simple and vanilla. If the dollar value goes over $1,000 the view after consultation was that we were starting to get into slightly more complex territory. There is no hard and fast reason why $1,000 was chosen. In some sense it is just a round number and a relatively familiar number to the market.[61]

Proposed subsections 713A(21)–(23) of the Corporations Act give ASIC the power to make a determination, which can effectively prevent an issuing body from using the streamlined two-part prospectus for simple corporate bonds to offer simple corporate bonds. In such cases, ASIC is required to publish the determination in the Gazette.[62]

Much of the detail about how the proposed streamlined disclosure regime will work will be set out in regulation. Treasury has indicated that it is currently engaged in consultations with industry and ASIC on the disclosure regulations and expects to be able to release draft regulations for public consultation in late June or early July 2013.[63] Proposed subsections 713A(24)–(27) of the Corporations Act specify that, in addition to satisfying the conditions set out in proposed section 713A, the securities, the offer of the securities, and the issuer, must comply with any other conditions or requirements which are set out in regulation. The Senate Standing Committee for the Scrutiny of Bills has sought advice from the Minister on why it is necessary to allow for additional conditions in the regulations and, pending the Minister’s advice, draws Senators’ attention to these provisions, which might be considered to be an inappropriate delegation of legislative power.[64]

The two-part simple corporate bonds prospectus

Proposed sections 713B–713E establish the legal framework for the streamlined two-part prospectus regime for simple corporate bonds.

Under the proposed framework an issuer will be able to offer a two-part prospectus comprising:

·         a base document setting out the information required by regulation for the period during which the offer of securities is made and

·         an offer-specific document setting out the information required by regulation relating to the specific offer.

Proposed subsections 713B(2), (3) and (4) make clear that it is the two documents together that constitute the prospectus for the offer of simple corporate bonds and that neither document constitutes a prospectus in its own right.

During consultation some submitters argued against making it mandatory to produce two disclosure documents for simple corporate bonds and indicated that they wanted the flexibility to be able to provide a single document. For example, Herbert Smith Freehills in its submission on the Exposure Draft argued that:

… whilst the ability to have a 2-part prospectus is welcome, the use of such a prospectus should not be mandatory. Many issuers will have in mind only infrequent issues and the requirement to prepare a ‘2-part’ prospectus is an unnecessary complication when all relevant disclosures could be included in a single disclosure document.[65]

Treasury indicated that it considers having both single and two-part disclosure documents could introduce a degree of complexity and confusion for retail investors. The two-part prospectus is intended to establish a clear market standard:

Flexibility is always good but, from the point of view of trying to establish a consistent standard and building investor confidence and an understanding of this product we want it to be consistent.[66]

While the regulations for the content of the disclosure documents have yet to be settled, the NAB in its submission to JCCFS emphasised the need to ensure the requirements are not too onerous:

NAB believes that to facilitate the development of the retail corporate bond market the documentation to issue corporate bonds should be no more onerous than what is currently required to issue equities. This view stems from investors in corporate bonds having an additional layer of protection from shareholders, as holder of bonds rank ahead of equity in the event of insolvency.[67]

The NAB argued that issuers of simple corporate bonds should be able to provide a base disclosure document which allows information to be incorporated by reference from ASIC, as well as a two-page term sheet outlining the key characteristics of the bond rather than an offer document.[68] The NAB noted that this is similar to a wholesale market program memorandum with a pricing supplement for each deal.

The two-part prospectus for simple corporate bonds must be lodged with ASIC (proposed subsections 713B(5), 713C(1) and 713D(1)). The Bill specifies that the expiry date for the two-part prospectus is the day that the offer-specific document expires (proposed subsection 713B(6)).

Proposed subsection 713C(1) provides that the base document has a life of three years starting on the date it is lodged with ASIC. In its submission to JCCFS, the NAB argued that the life of the base document should be extended to five years:

The legislation states that the life of the base document is three years however NAB recommends a five year life to enable repeat issuances. This proposal to extend the life of the base document is also based on direct feedback we have received from potential issuers of Simple Corporate Bonds from corporate Australia. Furthermore, we would recommend that the five year expiration date restart when the base prospectus is replaced with a new base prospectus.[69]

A further notable requirement of the two-part prospectus regime for simple corporate bonds is that the first offer made under an offer-specific document must have a minimum subscription of $50 million (proposed subsection 713D(5)). Treasury provided the following rationale for this requirement:

The thinking there is, again, to ensure that the retail corporate bonds that are issued under this regime are high quality. It will have the effect of limiting issuances to the top 200 companies in Australia. But again, because we have this trade-off between keeping the retail corporate bond simple and thereby being able to streamline the prospectus disclosure regime, our thinking is that $50 million is an appropriate figure for today.[70]

Treasury further indicated that once the market for simple corporate bonds has been established and retail investors have confidence in this type of investment, a future government could take another look at the $50 million minimum requirement.[71] This would enable lower capitalised companies to access funding through issuing of simple corporate bonds.

A key feature of the two-part prospectus regime for simple corporate bonds is that issuers will be able to refer to information lodged with ASIC rather than having to reproduce this material in the base or offer-specific documents (proposed subsections 713E(1)–(5)). The issuer is required to provide a copy of the lodged document (or the relevant part) free of charge to anyone who asks for it during the period covered by the base document or the application period for the offer-specific document.[72]

Item 31 inserts proposed section 719A into the Corporations Act setting out the circumstances in which it is necessary for an issuer to lodge supplementary or replacement documents for the two-part simple corporate bond prospectus (proposed subsections 719A(1)–(3)). The Bill specifies the form these documents should take (proposed subsections 719A(4)–(6)) and the consequences of lodging the documents (proposed subsections 719A(7)–(9)).

Rebalancing the prospectus liability regime for simple corporate bonds

Under current arrangements, one of the barriers to issuing simple corporate bonds to retail investors is the deemed liability provisions for directors in the Corporations Act which require a process of detailed due diligence to be undertaken by issuers. It is argued that such processes are expensive, time consuming and lengthen the time it takes for issuers to raise funds in this way.[73] On the other hand, there is a need to ensure investors have sufficient and accurate information about the issuer and the securities on offer to make an informed decision.

To reduce this impediment, the Bill proposes to streamline the prospectus liability regime for the issue of simple corporate bonds. The new streamlined liability regime does not completely remove the need for a due diligence process to be undertaken for the issue of simple corporate bonds. Rather, the measures effectively lower the bar in relation to securities which are relatively simple and straightforward and are high quality and low risk debt instruments. The changes only apply to simple corporate bonds and do not extend to more complex bond issues.

Item 41 of Schedule 1 of the Bill amends the table in subsection 729(1) of the Corporations Act to remove deemed civil liability of directors (or proposed directors) for misleading and deceptive statements in, or omissions from, a two-part simple corporate bond prospectus. However, a director (or proposed director) will still be civilly liable if they are directly involved in, among other things, the misleading or deceptive statement, the omission of required material, or where new circumstances have not been reflected in the disclosure document as required by the Corporations Act.[74]

In relation to this change, Treasury stated that:

Under the existing law of the Corporations Act directors can generally be sued for damages for prospectuses which contravene the prohibition against misleading or deceptive statements or omissions, even if they are not involved in the particular contravention. The Bill relieves their liability unless they are actively involved in the contravention, so directors cease to have deemed civil liability. They continue to have involvement of a civil liability but the due diligence defences remain available.[75]

As directors are required to consent to lodge a two-part simple corporate bond prospectus, they are still subject to the criminal liability provisions for these documents under sections 1308 and 1309 of the Corporations Act. Effectively, the consent requirement for directors, together with deemed liability for the issuer and others involved in the process, means that a due diligence process will still need to be undertaken.

Under subsection 1308(4) of the Corporations Act, a person is guilty of an offence if they lodge a document required by the Act which makes a statement that is false or misleading in a material particular, or omits any matter or thing without which the document is misleading in a material respect. It is a defence if the person has taken reasonable steps to ensure that the statement was not false or misleading or to ensure that the statement did not omit any matter or thing without which the document would be misleading.

Items 50–53 of Schedule 1 of the Bill amend sections 1308 and 1309 of the Corporations Act to clarify the type of conduct by a director which will be taken to constitute ‘reasonable steps’ in relation to the criminal provisions. The Bill provides that a director will be considered to have taken reasonable steps to ensure a statement or information in, or an omission from, a disclosure document is not false and misleading where:

·         the director has made all inquiries (if any) that were reasonable in the circumstances and, after doing so, the director believed on reasonable grounds that the statement was not misleading in a material particular or there was no such omission or

·         the director proves they relied on information provided to them by someone other than a director employee or agent of the issuer and the reliance placed on information by the director was reasonable in the circumstances.

During consultation there was a view among some submitters that the proposed changes in relation to directors’ civil and criminal liability do not go far enough. For example, in its submission to the JCCFS, the ABA argued that:

So long as directors are required to be involved in the issuance and directors’ prospectus liability remains, there continues to be a greater legal risk, administrative complexity and more costly burden involved in issuing retail corporate bonds than wholesale corporate bonds. In practice, directors will continue to be required to conduct due diligence processes rather than these processes being conducted by senior management and treasury functions. It is important for the proposed reforms to address the need for a director to be personally involved in the due diligence process.[76]

The ABA recommended that a business judgement exception (safe harbour or reasonable steps defence) be provided for directors making good faith decisions. Alternatively, the ABA argued that directors’ liability should be removed altogether and issuers should be liable for the preparation and content of a prospectus.[77]

Some interested parties also raised concerns that while the Bill streamlines the prospectus liability regime as it applies to directors, the changes do not extend to underwriters involved in the issuance of simple corporate bonds. For example, the LCA said in its submission on the Exposure Draft:

… underwriters will have deemed liability under section 729 for a defective 2-part simple corporate bonds prospectus. It is not appropriate for an underwriter to be exposed to this liability when directors of the issue are not. Again, the Committee submits that the practice of section 708AA offers is instructive. Imposing deemed liability on underwriters is not necessary to ensure that underwriters apply their expertise when advising issuers in proposed equity capital raisings.[78]

Parallel trading of simple corporate bonds on wholesale and retail markets

The Bill proposes to establish a legal framework to facilitate simple corporate bonds in the wholesale market being offered to retail investors using depository interests (see explanation of this term below). Retail investors will be able to buy and trade in simple corporate bonds depository interests in a way that is similar to trading in shares.

Ownership of depository interests will give retail investors beneficial ownership of the underlying simple corporate bond and the right to receive the periodic interest and principal payments due on the underlying security. The beneficial ownership model is already used in retail financial markets for financial products that for some reason cannot be directly traded on a financial market (for example, foreign-listed shares). It was also recently adopted to facilitate the retail trading of CGS.[79]

Simple corporate bond depository interests will be issued to retail investors by a simple corporate bond depository nominee, which will be the legal vehicle for issuing these depository interests to retail investors.

Items 6 and 7 of Schedule 1 of the Bill insert definitions of simple corporate bonds depository interest and simple corporate bonds depository nominee into section 9 of the Corporations Act as follows:

·         simple corporate bonds depository interest means a beneficial interest in simple corporate bonds, where the interest is issued by a simple corporate bonds depository nominee and

·         simple corporate bonds depository nominee means a person who issues to someone else beneficial interests in simple corporate bonds. The depository nominee will be able to own the simple corporate bonds in which beneficial interests are issued outright, or own beneficially the underlying simple corporate bond or have a beneficial interest in the underlying simple corporate bond. To offer beneficial interests in simple corporate bonds the depository nominee must have the agreement of the issuer of the underlying bonds.

As depository interests in simple corporate bonds can only be offered with the agreement of the issuer of the underlying bonds, the depository nominee does not have any disclosure responsibilities in relation to those bonds. This disclosure responsibility rests with the issuer of the simple corporate bonds. To remove the disclosure responsibility from the depository nominee item 10 of Schedule 1 of the Bill amends existing subsection 700(1) of the Corporations Act to clarify the meaning of the term securities for the purpose of Chapter 6D of the Corporation Act.

The details of how depository interests in simple corporate bonds will operate will be contained in regulations, which have yet to be finalised.

Schedule 2—Restricting the use of the terms ‘financial planner’ and ‘financial adviser’

Background

On 22 March 2012, during the second reading debate on the Future of Financial Advice (FOFA) reforms, the Minister for Financial Services and Superannuation, Bill Shorten, announced the Government would introduce legislation into Parliament by 1 July 2013 to enshrine the term ‘financial planner’ or ‘financial adviser’ into law.[80] However, the Minister for Financial Services and Superannuation’s reference to the announcement during the second reading speech for the current Bill suggests the Government’s intention at the time was to enshrine both terms in law.[81]

The amendments proposed in Schedule 2 of this Bill seek to strengthen protections for consumers by restricting the use of the terms ‘financial planner’, ‘financial adviser’ and terms of like import. In the second reading speech for the Bill, the Minister for Financial Services and Superannuation stated:

By legislatively defining the terms ‘financial planner’ and ‘financial adviser’, the amendments enable consumers to be able to easily identify genuine financial product advice providers. By preventing anyone who is not a qualified financial planner or financial adviser from telling consumers that they are, the amendments make it easier for consumers to know who to trust with their financial affairs. The measures contained in Schedule 2 of the Bill strengthen protections for consumers.[82]

The measures proposed in this Bill follow the passage of the FOFA legislation through the Parliament last year.[83] The FOFA reforms are the Government's response to the JCCFS’s inquiry into financial products and services in Australia; and are intended to improve the trust and confidence of Australian retail investors in the financial planning sector. Compliance with the new measures is voluntary until 1 July 2013 and mandatory from then on.[84]

The current situation

The range of issues about which Australians seek financial advice is wide ranging and includes: retirement planning; superannuation; financial investment (for example, shares and managed funds); property investment (for example, financing, selection and valuation); debt management or consolidation; budgeting; insurance; and estate planning.[85]

While some consumers want the development of a comprehensive financial plan, others may simply be seeking advice on a specific issue or just looking for some basic information so they can ‘do it themselves’.[86]

However, it seems a large proportion of the Australian population does not access financial advice. Research by the Association of Financial Advisers (AFA) suggests just under two in ten Australians had an active advice relationship with a financial planner in 2011.[87] Further, ASIC has cited surveys suggesting between 60 and 80 per cent of Australians have never used a financial adviser.[88]

There are a number of reasons why this may be the case. ASIC’s research suggests some of the potential barriers include: the cost of advice; the gap between consumers wanting piece-by-piece simple advice and the services commonly provided or promoted by advisers; consumer perceptions that financial advice is out of their reach; consumer mistrust of financial planners; complexity in the planning process; poor access to general advice and information; and low levels of financial literacy.[89]

The terms ‘financial planner’ and ‘financial adviser’

Currently, there is no specific legal restriction on the use of the terms ‘financial planner’ and ‘financial adviser’.

Key industry bodies have raised concerns about consumers being confused about the definition and role of financial planners and financial advisers and the potential for consumers to be misled by unlicensed and unqualified individuals calling themselves a financial planner or financial adviser. For example, the Financial Planning Association of Australia (FPA) has stated that:

There is a high level of confusion in the market, within industry, media, government and consumers, about the definitions and roles of financial planners, financial advisers, those that just sell financial products and those operating unlicensed. Some incorrectly represent themselves to consumers as financial planners without the appropriate training, licensing, and professional standing and competency required. This significantly erodes consumer protection. The lack of constraint on individuals calling themselves financial planners puts consumers at risk of receiving poor advice from incompetent providers and creates consumer confusion.[90]

The FPA went on to say that the term ‘financial planner’:

… is increasingly being used in marketing and promotional material by persons providing non-traditional ancillary services such as realtors, stockbrokers, life insurance agents or brokers, mortgage brokers, property brokers, sales agents of various investment vehicles, accountants and unlicensed individuals.[91]

Research undertaken by AFA suggests that prior to engaging a financial adviser clients typically do not know what a financial adviser does or have an understanding of their services.[92]

It is also worth noting that AFA estimates between 40 and 50 per cent of financial planners and financial advisers who are licensed are not members of a professional body.[93]

While the use of the terms ‘financial planner’ and ‘financial adviser’ are not legally restricted there are restrictions on who can provide financial product advice.

The regulatory framework

As Australia’s corporate, markets and financial services regulator, ASIC is responsible for enforcing Commonwealth laws in relation to financial product advice. One of ASIC’s roles is to promote confident and informed participation by investors and consumers in the financial system.[94]

Consumers of financial services are protected from unfair practices by a number of laws including the Australian Securities and Investments Commission Act 2001 (the ASIC Act).[95] The ASIC Act prohibits misleading or deceptive conduct in relation to financial services (section 12DA), and prohibits certain false and misleading representations (section 12DB).

The Corporations Act requires people who carry on a business of providing financial services to hold an Australian Financial Services Licence (AFSL) (unless they are covered by an exemption or are authorised to provide those financial services as a representative of another person who holds an ASFL).[96] Among other things, a person is held to provide a financial service if they provide financial product advice or deal in a financial product.[97]

The requirement to hold an AFSL comes with a range of obligations including general licensee obligations, conduct and disclosure obligations and specific obligations relating to the provision of financial product advice.[98]

Section 911C of the Corporations Act prohibits a person from representing that they hold (or are exempt from holding) an AFSL if that is not the case. This section also prevents them from representing that they are authorised by another AFSL holder if they are not in fact authorised.

Policy development

The Minister for Financial Services and Superannuation released an Exposure Draft of amendments to the Corporations Act to restrict the use of the terms financial planner and financial adviser on 28 November 2012.[99] In response to the Exposure Draft, Treasury received 16 submissions from interested parties, which are available from the Treasury website.[100]

What changes are being proposed?

To enhance investor protection and consumer confidence by making it easier to identify genuine providers of financial product advice this Bill proposes:

·         restricting the use of the terms ‘financial planner’ and ‘financial adviser’ and terms of like import to people authorised under the AFSL regime to provide financial advice on designated financial products

·         allowing the Government to make regulations prescribing other restricted terms that a person will only be able to use if they operate under the AFSL regime and

·         specifying that people who breach the restriction on using the terms ‘financial planner’ and ‘financial adviser’ and terms of like import will attract a penalty of 10 penalty units per day if an individual and 50 penalty units per day if a corporation.

Position of major interest groups

There is strong support among key interest groups for the Government’s objective of enhancing investor protection and consumer confidence; and in restricting the use of the terms ‘financial planner’ and ‘financial adviser’ and terms of like import. Those organisations that have indicated their support include:

·         AFA has said that it is ‘strongly supportive of the proposed legislation to enshrine the terms ‘financial planner’ and ‘financial adviser’ in the Corporations Act. We believe that this legislation is good for financial advisers and also for the consumers who rely upon financial advice. Consumers deserve to have clarity with respect to who they are seeking advice from’[101]

·         FPA has stated that it is its ‘strong belief that to strengthen consumer protection and to continue the journey towards creating a true profession, the law must restrict the term ‘financial planner’ to only those that have the highest level of education, competency, ethics and standards and are a member of a “recognised professional body”’[102]

·         the Australian Institute of Superannuation Trustees (AIST) has indicated that it ‘welcomes the addition of the terms ‘financial planner’ and ‘financial adviser’ to the list of protected terms relating to advisers and salespeople in financial services. We consider that this protection is vital to ensuring that consumers are not misled and welcome the certainty that will be brought to this profession into the future’[103]

·         the Financial Services Council (FSC) has said that it ‘supports the intention of the draft legislative amendments to introduce a distinction to clarify when a person can use certain prescribed terms, specifically ‘financial planner’ and ‘financial adviser’’[104] and

·         the Industry Super Network has stated that it ‘strongly supports this proposed reform and believe that it is critical to ensure that use of the terms ‘financial adviser’ and ‘financial planner’ are appropriately restricted to ensure higher standards of consumer protection’.[105]

That said, concerns were raised during consultation on the Exposure Draft about whether use of both ‘financial planner’ and ‘financial adviser’ should be restricted.[106] This issue is discussed further in the ‘Key issues and provisions’ section.

Key issues and provisions

The provisions in Schedule 2 of this Bill seek to enhance investor protection and consumer confidence by restricting the use of the terms ‘financial planner’ and ‘financial adviser’ and terms of like import to people authorised under the AFSL regime to provide financial advice on designated financial products.

As the Explanatory Memorandum notes, the Corporations Act already defines and restricts a number of other terms, for example, ‘stockbroker’, ‘futures broker’ and ‘insurance broker’.[107] As such, there are already precedents for the measures proposed in this Bill.

A crucial issue is whether the benefits from the measures proposed in this Bill outweigh the associated regulatory costs in terms of compliance and enforcement. In this regard, a key factor is the extent to which people are currently offering financial advice to consumers outside of the AFSL regime and the size of the costs associated with this. As reflected in testimony by the peak industry bodies before the JCCFS, the evidence on this appears to be largely anecdotal.[108] However, this is not to say there is not a problem warranting a regulatory response, merely that in making this judgement it is difficult to gauge the magnitude of the problem. That said, in making the case for these changes, the FPA has noted that in the twelve months to 31 December 2012, over 12 per cent of ASIC’s financial services enforcements related to matters against unlicensed providers.[109]

A further consideration is the extent to which the measures in this Bill are likely to be successful in changing the behaviour of people currently operating outside of the law. It is unclear the extent to which people who are currently offering financial product advice outside of the AFSL regime will be inclined to change their behaviour in response to these measures.

Educating both sides of the retail investment market about the changes in this Bill and their implications would appear to be crucial to achieving the Government’s objectives. As noted above, JCCFS has recommended that ASIC clearly sets out on its MoneySmart website the changes that the Bill makes to inform consumers about what they can expect when they receive a service from a ‘financial planner’ or a ‘financial adviser’.

Restricting the use of the terms ‘financial planner’ and ‘financial adviser’

Item 1 of Schedule 2 of the Bill inserts proposed section 923C into Division 10 of Part 7.6 of the Corporations Act.

Proposed subsection 923C(4) of the Corporations Act specifies that the expressions ‘financial planner’ and ‘financial adviser’, any other words specified in regulations and any other word or expression that is of like import are restricted words or expressions for the purpose of proposed section 923C. A person will be held to have assumed or used a restricted term or expression if they use these terms as part of another expression or in combination with other words, letters or other symbols (proposed paragraph 923C(4)(b)).

A person will contravene proposed subsection 923C(1) if they use a restricted term or expression in carrying on a financial services business, whether this business is on their own behalf or someone else’s; or someone else provides the financial service on their behalf.

There is an exception to this general rule. A person will not contravene proposed subsection 923C(1) if they hold an ASFL and are authorised to provide personal advice in relation to designated financial products or they provide this advice on behalf of another person who holds an AFSL and is so authorised (proposed subsection 923C(2)).[110]

A person who commits an offence under proposed subsection 923C(1), commits the offence from the first day of the contravention and on each subsequent day on which the circumstances that gave rise to the offence continue (proposed subsection 923C(3)).

Item 2 of Schedule 2 of the Bill inserts item number 269AAA into the table in Schedule 3 to the Corporations Act so that an offence under subsection 923C(1) is listed in the Schedule of penalties. The effect of this amendment is that the offence is captured by section 1311 of the Corporations Act which sets out the general penalty provisions. Individuals will attract 10 penalty units for each day, or part of a day, the offence is committed. Under section 1312 of the Corporations Act the fine imposed on a body corporate that is convicted of the offence must not exceed five times the maximum amount that could be imposed as a pecuniary penalty for the offence.[111]

As noted above, during consultation on the Exposure Draft concerns were raised about whether there was a need to restrict both the term ‘financial planner’ and ‘financial adviser’. In a joint submission by CPA Australia and the Institute of Chartered Accountants Australia these organisations noted:

At a conceptual level the regulation of specific terms could introduce complexity and additional costs, which would inevitably be passed onto the consumer. Therefore, it needs to be clearly demonstrated that implementing further regulation is in fact in the public interest and will deliver positive benefits to the public and more specifically to those who seek professional financial planning advice.[112]

While these organisations supported enshrining the term ‘financial planner’ in law they did not support restricting the use of the term ‘financial adviser’, which they argued would add complexity to consumers’ understanding. They also noted the term ‘financial adviser’ is recognised and used in broader terms by other professionals than those licensed to provide financial product advice to retail clients.

Similarly, Deloitte also urged the Government to reconsider restricting the term financial adviser. It argued that:

…if the term is to be restricted, we would urge the Government to take a far more expansive approach to its definition and include practitioners who provide financial services more generally (i.e. to include dealing and dealing by arranging), practitioners who provide advice to wholesale clients and those who rely on an exemption to provide financial services.[113]

Against this, Treasury has argued:

In terms of our assessment, we are much of the view that these terms are used interchangeably and I think that was also repeated by the FPA, so it is very hard for the Government to restrict just financial planners and not financial advisers given that there is that sort of common usage.[114]

Is there a need for a transition period?

The amendments in Schedule 2 commence on the later of 1 July 2013 and the day after the Act receives the Royal Assent.

The FSC has argued that a significant proportion of the industry will be in contravention of the new legislation and thereby committing an offence the day after the Act is enacted.[115] It recommends the industry be given twelve months from the Royal Assent to transition all written material, job structures, titles and all business collateral material to comply:

… industry requires time to amend all disclosure documentation …, marketing material, websites, amend job titles, published job descriptions, business cards etc in order to comply with the legislation.[116]

When asked about the lack of a transition period as part of the JCCFS inquiry, Treasury stated:

These reforms have been signalled previously. They were announced as part of the eight broader financial reforms. There is a sort of a 12-month period where people would have been aware of these reforms. There also been a period of consultation on the draft regulations. There has been a bit of a lag in the timeframe for people to be aware of these arrangements coming into place.[117]

As noted above, JCCFS has recommended ASIC consult with key stakeholders in the financial advice sector to implement a grace period to ensure that in the short-term, passive breaches of the new provisions will not be prosecuted. Further, the Committee has recommended that ASIC should engage with the financial advice sector to discuss the time that practitioners will need to ensure that signage is changed.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.

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ISSN 1328-8091

[1].              The text of the Corporations Act 2001 can be viewed at: http://www.comlaw.gov.au/Details/C2013C00003/Download

[2].              Selection Committee, Report No. 78: Private Members’ business and referral of bills to committees, House of Representatives, Canberra, 21 March 2013, p. 3, viewed 26 April 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/House_of_Representatives_Committees?url=selc/reports.htm

[3].              Details of the terms of reference, submissions to the Committee and the final report  are available at: Parliamentary Committee on Corporations and Financial Services, Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, viewed 28 May 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=corporations_ctte/completed_inquiries/2010-13/simplecorporatebonds_2013/index.htm

[4].              Selection of Bills Committee, Report No. 4 of 2013, Senate, Canberra, 21 March 2013, p. 5, viewed 26 April 2013,
http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=selectionbills_ctte/reports/2013.htm

[5].              Parliamentary Joint Committee on Corporations and Financial Services, Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, 15 May 2013, p. 54, viewed 27 May 2013,
http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=corporations_ctte/completed_inquiries/2010-13/simplecorporatebonds_2013/report/index.htm

[6].              Parliamentary Joint Committee on Corporations and Financial Services, Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, op. cit., p. 30.

[7].              Ibid.

[8].              Ibid.

[9].              Ibid., p. 60.

[10].              Ibid., p. 53.

[11].              Ibid., pp. 50-51.

[12].              Ibid., p. 53.

[13].              Ibid., pp. 60-61.

[14].              Ibid. p. 61.

[15].              Senate Standing Committee for the Scrutiny of Bills, Fifth Report of 2013, Senate, Canberra, 15 May 2013, pp. 19-20, viewed 28 May 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=scrutiny/bills/2013/index.htm

[16].              The Statement of Compatibility with Human Rights can be found at page 35 of the Explanatory Memorandum, Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, viewed 3 May 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fems%2Fr5007_ems_0f2e5f92-2719-49a0-8b92-d9b841a47755%22

[17].              Parliamentary Joint Committee on Human Rights, Sixth Report of 2013, Commonwealth of Australia, Canberra, 15 May 2013, pp. 6-8, viewed 27 May 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=humanrights_ctte/reports/index.htm

[18].              Ibid., p. 8.

[19].              Explanatory Memorandum, Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, op. cit., p. 3.

[20].              Australian Government, Competitive and sustainable banking system, Commonwealth of Australia, Canberra, 12 December 2010, p. 24, viewed 30 April 2013, http://banking.treasury.gov.au/banking/content/reports/announcement/downloads/competitive_and_sustainable_banking.pdf

[21].              The text of the Commonwealth Government Securities Legislation Amendment (Retail Trading) Act 2012 can be viewed at: http://www.comlaw.gov.au/Details/C2012A00155/Download

[22].              A corporate bond is a type of debt instrument issued by a company, promising to pay a specific amount of interest (the coupon) for a given period of time (the term), with the principal being repaid on maturity. Simple (or ‘vanilla’) corporate bonds are those that have relatively simple and straightforward terms and conditions; and are relatively high quality and low-risk debt instruments.

[23].              B Shorten (Minister for Financial Services and Superannuation), ‘Second reading speech: Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013’, House of Representatives, Debates, 20 March 2013, p. 2723, viewed 2 May 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F8143f75e-7f37-4128-8d3b-e62455d99a32%2F0063%22

[24].              S Black and others, A history of Australian corporate bonds, Research discussion paper, RDP 2012-09, Reserve Bank of Australia, December 2012, p. 1, viewed 26 April 2013, http://www.rba.gov.au/publications/rdp/2012/pdf/rdp2012-09.pdf

[25].              The Australian Financial Centre Forum (AFCF) was established on 26 September 2008 to progress the Government’s initiative to position Australia as a leading financial services centre in the region. More information about the AFCF is available at: http://afcf.treasury.gov.au/afcf/content/default.asp

[26].              Australian Financial Centre Forum, Australia as a financial centre: building on our strengths, Commonwealth of Australia, Canberra, November 2009, viewed 2 May 2013, http://cache.treasury.gov.au/treasury/afcf/content/final_report/downloads/AFCF_Building_on_Our_Strengths_Report.pdf

[27].              G Debelle, Some recent (and not so recent) trends in Australian debt markets, Address to the KangaNews DCM Summit 2013, Sydney, 19 March 2013, viewed 20 March 2013, http://www.rba.gov.au/speeches/2013/sp-ag-190313.html

[28].              Ibid.

[29].              Australian Centre for Financial Studies, Australian corporate bonds: the missing asset class for Australian retail investors, National Australia Bank, December 2012, p. 4, viewed 29 April 2013, http://business.nab.com.au/wp-content/uploads/2012/12/australian-corporate-bonds-january-2013.pdf

[30].              S Black and others, A history of Australian corporate bonds, op. cit., p. 21.

[31].              Ibid., pp. 21–22.

[32].              Australian Government, Development of the retail corporate bond market: streamlining disclosure and liability requirements, Discussion paper, Commonwealth of Australia, Canberra, December 2011, p. 4, viewed 29 April 2013,
http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/2011/Development%20of%20the%20Retail%20Corporate%20Bond%20Market%20Streamlining%20Disclosure%20and%20Liability%20Requirements/Key%20Documents/PDF/Retail_Corporate%20Bonds_DP.ashx

[33].              Explanatory Memorandum, op. cit., p. 6.

[34].              Australian Government, Development of the retail corporate bond market: streamlining disclosure and liability requirements, Discussion paper, op. cit., p. 20.

[35].              Ibid., p. 21.

[36].              Australian Financial Centre Forum, Australia as a financial centre: building on our strengths, op. cit., p. 93.

[37].              Ibid., recommendation 4.6, p. 96.

[38].              Ibid., p. 96.

[39].              Australian Government, Development of the retail corporate bond market: streamlining disclosure and liability requirements, Discussion paper, op. cit., p. 1.

[40].              W Swan (Treasurer), Developing the retail corporate bond market, media release, 13 December 2011, viewed 3 May 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F1292965%22

[41].              Australian Government, Development of the retail corporate bond market: streamlining disclosure and liability requirements, Discussion paper, op. cit., pp. 3-4.

[42].              Treasury, ‘Development of the retail corporate bond market: streamlining disclosure and liability requirements’, Treasury website, viewed 29 April 2013, http://www.treasury.gov.au/ConsultationsandReviews/Submissions/2011/Development-of-the-Retail-Corporate-Bond-Market-Streamlining-Disclosure-and-Liability-Requirements

[43].              Treasury, ‘Consultations and submissions: Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013’, Treasury website, viewed 29 April 2013, http://www.treasury.gov.au/ConsultationsandReviews/Submissions/2013/corporations_amendment

[44].              Australian Government, Development of the retail corporate bond market: streamlining disclosure and liability requirements, Discussion paper, op. cit., p. 4.

[45].              Explanatory Memorandum, Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, Exposure Draft, pp. 6-7, viewed 29 April 2013,
http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/2013/Corporations_Amendment/downloads/PDF/Explanatory-Memorandum.ashx

[46].              S Lambert (Executive General Manager of Debt Markets, National Australia Bank), ‘Evidence to the Parliamentary Joint Committee on Corporations and Financial Services’, Inquiry into the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, Committee Hansard, 22 April 2013, p. 1, viewed 3 May 2013,
http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=corporations_ctte/simplecorporatebonds_2013/hearings/index.htm

[47].              R Sandlant, (Manager, Disclosure and International Unit, Retail Investor Division, Markets Group, Treasury), ‘Evidence to the Parliamentary Joint Committee on Corporations and Financial Services, Inquiry into the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, Committee Hansard, 22 April 2013, p. 9, viewed 3 May 2013,
http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=corporations_ctte/simplecorporatebonds_2013/hearings/index.htm

[48].              A Robb (Shadow Minister for Finance, Deregulation and Debt Reduction), Our financial system’s missing link – developing a retail corporate bond market, Address to The University of Melbourne Faculty of Business and Economics, 21 November 2012, viewed 3 May 2013, http://www.andrewrobb.com.au/Media/Speeches/tabid/73/articleType/ArticleView/articleId/1455/Our-financial-systems-missing-link--developing-a-retail-corporate-bond-market.aspx

[49].              Ibid.

[50].              Australian Bankers’ Association, Submission to the Parliamentary Joint Committee on Corporations and Financial Services, Inquiry into the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, 26 April 2013, p. 1, viewed 3 May 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=corporations_ctte/simplecorporatebonds_2013/submissions.htm

[51].              Law Council of Australia, Submission to Treasury, Exposure Draft of the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, 22 February 2013, p. 1, viewed 22 April 2013,
http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/2013/Corporations_Amendment/Submissions/PDF/Law_Council_of_Australia.ashx

[52].              Association of Superannuation Funds of Australia, Submission to Treasury, Exposure Draft of the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, 15 February 2013, p. 1, viewed 22 April 2013, http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/2013/Corporations_Amendment/Submissions/PDF/The_Association_of_Superannuation_Funds_of_Australia.ashx

[53].              Self Managed Superannuation Funds Professionals’ Association of Australia, Submission to the Parliamentary Joint Committee on Corporations and Financial Services, Inquiry into the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, 18 April 2013, p. 3, viewed 3 May 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=corporations_ctte/simplecorporatebonds_2013/submissions.htm

[54].              Australian Bankers’ Association, Submission to Treasury, Exposure Draft of the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, 20 February 2013, p. 2, viewed 22 April 2013, http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/2013/Corporations_Amendment/Submissions/PDF/Australian_Bankers_Associaton.ashx; Australian Financial Markets Association, Submission to Treasury, Exposure Draft of the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, 15 February 2013, p. 2, viewed 22 April 2013, http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/2013/Corporations_Amendment/Submissions/PDF/Australian_Financial_Markets_Association.ashx; Herbert Smith Freehills, Submission to Treasury, Exposure Draft of the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, 15 February 2013, p. 2, viewed 22 April 2013, http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/2013/Corporations_Amendment/Submissions/PDF/Herbert_Smith_Freehills.ashx and Minter Ellison, Submission to Treasury, Exposure Draft of the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, 15 February 2013, p. 3, viewed 22 April 2013, http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/2013/Corporations_Amendment/Submissions/PDF/Minter_Ellison.ashx

[55].              According to subsection 92(2) of the Corporations Act, the expression securities, when used in relation to a body, means shares in the body, debentures of the body, interests in a managed investment scheme made available by the body or units of such shares, but does not include a derivative (as defined in chapter 7) or an excluded security.

[56].              Explanatory Memorandum, Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, op. cit., pp. 11–14.

[57].              Section 9 of the Corporations Act contains an extensive definition of the term debenture. In essence, it is any document that either creates or acknowledges a debt owed by a company. Source: Butterworths Concise Australian Legal Dictionary, third edn, LexisNexis Butterworths, Australia, 2004, p. 114.

[58].              Australian Bankers’ Association, Submission to the Parliamentary Joint Committee on Corporations and Financial Services, op. cit., p. 2.

[59].              Minter Ellison, Submission to Treasury, op. cit., p. 4.

[60].              Ibid., p. 6.

[61].              R Sandlant, (Manager, Disclosure and International Unit, Retail Investor Division, Markets Group, Treasury), ‘Evidence to the Parliamentary Joint Committee on Corporations and Financial Services’, op. cit., p. 12.

[62].              Proposed subsection 713A(23) of the Corporations Act.

[63].              R Sandlant, (Manager, Disclosure and International Unit, Retail Investor Division, Markets Group, Treasury), ‘Evidence to the Parliamentary Joint Committee on Corporations and Financial Services’, op. cit., p. 9.

[64].              Senate Standing Committee for the Scrutiny of Bills, Fifth Report of 2013, op. cit., p. 20.

[65].              Herbert Smith Freehills, Submission to Treasury, op. cit., p. 2.

[66].              R Sandlant, (Manager, Disclosure and International Unit, Retail Investor Division, Markets Group, Treasury), ‘Evidence to the Parliamentary Joint Committee on Corporations and Financial Services’, op. cit., p. 13.

[67].              National Australia Bank, Submission to the Parliamentary Joint Committee on Corporations and Financial Services, Inquiry into the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, 19 April 2013, p. 2, viewed 3 May 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=corporations_ctte/simplecorporatebonds_2013/submissions.htm

[68].              Ibid., p. 2.

[69].              Ibid., p. 3.

[70].              R Sandlant, (Manager, Disclosure and International Unit, Retail Investor Division, Markets Group, Treasury), ‘Evidence to the Parliamentary Joint Committee on Corporations and Financial Services’, op. cit., p. 13.

[71].              Ibid., p. 13.

[72].              Proposed subsection 713E(5) of the Corporations Act.

[73].              Minter Ellison, Submission to Treasury, op. cit., p. 9.

[74].              Explanatory Memorandum, pp. 11–14.

[75].              R Sandlant, (Manager, Disclosure and International Unit, Retail Investor Division, Markets Group, Treasury), ‘Evidence to the Parliamentary Joint Committee on Corporations and Financial Services’, op. cit., p. 10.

[76].              Australian Bankers’ Association, Submission to the Parliamentary Joint Committee on Corporations and Financial Services, op. cit., p. 5.

[77].              Ibid., p. 5.

[78].              Law Council of Australia, Submission to Treasury, op. cit., p. 3.

[79].              Commonwealth Government Securities Legislation Amendment (Retail Trading) Act 2012, op. cit.

[80].              B Shorten (Minister for Financial Services and Superannuation), ‘Second reading speech: Corporations Amendment (Future of Financial Advice) Bill 2011, Corporations Amendment (Further Future of Financial Advice Measures) Bill 2011’, House of Representatives, Debates, 22 March 2012, p. 4096, viewed 6 May 2013,
http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F843adba4-b07b-4642-9c44-98beb898a1b5%2F0286%22

[81].              B Shorten (Minister for Financial Services and Superannuation), ‘Second reading speech: Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013’, op. cit., p. 2724.

[82].              Ibid.

[83].              Corporations Amendment (Future of Financial Advice) Bill 2012, viewed 7 May 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr4689%22 and Corporations Amendment (Further Future of Financial Advice Measures) Bill 2012, viewed 7 May 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr4739%22

[84].              Treasury, ‘Implementation’, Treasury website, viewed 7 May 2013, http://futureofadvice.treasury.gov.au/content/Content.aspx?doc=implement.htm

[85].              Australian Securities and Investments Commission (ASIC), Access to financial advice in Australia, Report 224, ASIC, December 2010, pp. 16–17, viewed 7 May 2013, http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep224.pdf/$file/rep224.pdf

[86].              Ibid., p. 11.

[87].              B Fox, (Chief Executive Officer, Association of Financial Advisers), ‘Evidence to the Parliamentary Joint Committee on Corporations and Financial Services’, Inquiry into the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, Committee Hansard, 22 April 2013, p. 22, viewed 7 May 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=corporations_ctte/simplecorporatebonds_2013/hearings/index.htm

[88].              Australian Securities and Investments Commission, Access to financial advice in Australia, op. cit., p. 13.

[89].              Ibid., p. 45.

[90].              Financial Planning Association of Australia, Submission to Treasury, Exposure Draft of the legislative amendments relating to the use of the expressions ‘financial planner’ and ‘financial adviser’, 21 December 2012, pp. 2-3, viewed 24 April 2013,
http://futureofadvice.treasury.gov.au/content/consultation/expressions_financial_planner/submissions/Financial_Planning_Association_of_Australia.pdf

[91].              Ibid., p. 3.

[92].              Association of Financial Advisers (AFA), Pathways to excellence: insights from leading advisory practices, AFA white paper, October 2012, p. 6, viewed 7 May 2013, http://www.afa.asn.au/documents/item/172

[93].              B Fox, (Chief Executive Officer, Association of Financial Advisers), ‘Evidence to the Parliamentary Joint Committee on Corporations and Financial Services’, op. cit., p. 27.

[94].              Australian Securities and Investments Commission, ‘Our role’, ASIC website, viewed 7 May 2013, http://www.asic.gov.au/asic/asic.nsf/byheadline/Our+role?openDocument#

[95].              The text of the Australian Securities and Investments Commission Act 2001 can be viewed at: http://www.comlaw.gov.au/Details/C2013C00002

[96].              Australian Securities and Investments Commission, ‘Do you need an AFS licence?’, ASIC website, viewed 7 May 2013, http://www.asic.gov.au/asic/ASIC.NSF/byHeadline/Do%20you%20need%20an%20AFS%20licence%3F

[97].              Australian Securities and Investment Commission, Licensing: financial product advice and dealing, Regulatory Guide 36, April 2011, p. 4, viewed 7 May 2013, http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rg36-010411.pdf/$file/rg36-010411.pdf

[98].              Ibid., pp. 24–26.

[99].              B Shorten (Minister for Financial Services and Superannuation), Consumers and 18 000 financial planners and advisers benefit from government reforms, media release, 28 November 2012, viewed 7 May 2013, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F2073980%22

[100].              Treasury, ‘Exposure Draft of the legislative amendments relating to the use of the expressions “financial planner” and “financial adviser”’, Treasury website, viewed 7 May 2013, http://futureofadvice.treasury.gov.au/content/Content.aspx?doc=consultation/expressions_financial_planner/default.htm

[101].              Association of Financial Advisers, Submission to Treasury, Exposure Draft of the legislative amendments relating to the use of the expressions ‘financial planner’ and ‘financial adviser’, 21 December 2012, p. 1, viewed 7 May 2013, http://futureofadvice.treasury.gov.au/content/consultation/expressions_financial_planner/submissions/Association_Financial_Advisers.pdf

[102].              Financial Planning Association of Australia, Submission to Treasury, Exposure Draft of the legislative amendments relating to the use of the expressions ‘financial planner’ and ‘financial adviser’, op. cit., p. 3.

[103].              Australian Institute of Superannuation Trustees, Submission to Treasury, Exposure Draft of the legislative amendments relating to the use of the expressions ‘financial planner’ and ‘financial adviser’, 21 December 2012, p. 1, viewed 7 May 2013, http://futureofadvice.treasury.gov.au/content/consultation/expressions_financial_planner/submissions/Australian_Institute_of_Superannuation_Trustees.pdf

[104].              Financial Services Council, Submission to Treasury, Exposure Draft of the legislative amendments relating to the use of the expressions ‘financial planner’ and ‘financial adviser’, 21 December 2012, p. 1, viewed 7 May 2013, http://futureofadvice.treasury.gov.au/content/consultation/expressions_financial_planner/submissions/Financial_Services_Council.pdf

[105].              Industry Super Network, Submission to Treasury, Exposure Draft of the legislative amendments relating to the use of the expressions ‘financial planner’ and ‘financial adviser’, 21 December 2012, p. 1, viewed 7 May 2013,
http://futureofadvice.treasury.gov.au/content/consultation/expressions_financial_planner/submissions/Industry_Super_Network.pdf

[106].              CPA Australia and the Institute of Chartered Accountants Australia, Submission to Treasury, Exposure Draft of the Corporations and Consumer Legislation Amendment (Consumer Financial Protection) Bill 2012, 21 December 2012, viewed 7 May 2013, http://futureofadvice.treasury.gov.au/content/consultation/expressions_financial_planner/submissions/CPA_Australia_and_Institute_of_Chartered_Accountants_Australia.pdf and Deloitte, Submission to Treasury, Exposure Draft of the Corporations and Consumer Legislation Amendment (Consumer Financial Protection) Bill 2012: amendments relating to the use of the expressions financial planner and financial adviser, 21 December 2012, viewed 7 May 2013, http://futureofadvice.treasury.gov.au/content/consultation/expressions_financial_planner/submissions/Deloitte.pdf

[107].              Explanatory Memorandum, op. cit., p. 30.

[108].              Commonwealth of Australia, ‘Evidence to the Parliamentary Joint Committee on Corporations and Financial Services’, Inquiry into the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, Committee Hansard, 22 April 2013, viewed 7 May 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=corporations_ctte/completed_inquiries/2010-13/simplecorporatebonds_2013/hearings/index.htm

[109].              M Rantall (Chief Executive Officer, Financial Planning Association of Australia), ‘Evidence to the Parliamentary Joint Committee on Corporations and Financial Services’, Inquiry into the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, Committee Hansard, 22 April 2013, p. 29, viewed 7 May 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=corporations_ctte/completed_inquiries/2010-13/simplecorporatebonds_2013/hearings/index.htm

[110].              The term designated financial product is defined in proposed subsection 923C(5) as a financial product other than a general insurance product (other than a sickness and accident insurance product), a consumer credit insurance product, a basic deposit product, a non-cash payment product or an FHSA deposit account.

[111].              Under section 4AA of the Crimes Act 1914 (Cth), a penalty unit is $170. The Crimes Act, viewed 28 May 2013, is available at: http://www.comlaw.gov.au/Details/C2013C00180

[112].              CPA Australia and the Institute of Chartered Accountants Australia, Submission to Treasury, op. cit., p. 1.

[113].              Deloitte, Submission to Treasury, op. cit., p. 3.

[114].              B Fraser, (Manager, Intermediaries and Regulatory Powers Unit, Retail Investor Division, Markets Group, Treasury), ‘Evidence to the Parliamentary Joint Committee on Corporations and Financial Services’, Inquiry into the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, Committee Hansard, 22 April 2013, p. 38, viewed 7 May 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committees?url=corporations_ctte/completed_inquiries/2010-13/simplecorporatebonds_2013/hearings/index.htm

[115].              Financial Services Council, Submission to Treasury, Exposure Draft of the legislative amendments relating to the use of the expressions ‘financial planner’ and ‘financial adviser’, op. cit., p. 8.

[116].              Ibid.

[117].              B Fraser, (Manager, Intermediaries and Regulatory Powers Unit, Retail Investor Division, Markets Group, Treasury), ‘Evidence to the Parliamentary Joint Committee on Corporations and Financial Services’, op. cit., p. 39.