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Coalition Members Additional Comments
(Simple Corporate Bonds and Other Measures) Bill 2013
The Coalition strongly supports efforts to establish a deep and liquid
corporate bond market. The Shadow Treasurer Joe Hockey has been calling on the
government to take action to achieve that important economic and financial
services policy objective since October 2010.
We note that it has taken the Treasurer nearly three years to bring
forward legislation to help achieve a deep and liquid corporate bond market.
The Coalition will in the context of its Financial Systems Inquiry and
as part of our commitment to reduce unnecessary red tape for business monitor
the implementation of this legislation and pursue further improvements in
Enshrinement of terms financial planner/financial adviser
In relation to the proposed enshrinement of the terms financial planner
and financial adviser in the Corporations Act, the Coalition notes that the
government has attached this proposal to a completely unrelated Bill.
This change appears rushed, ad hoc and the government has not made the
case this will make a positive difference.
The Coalition remains sceptical about this proposal though we will not
oppose passage of the legislation.
Accountants are highly respected professionals without having the term
'accountant' enshrined in legislation.
Already now the only way anyone can provide financial advice is if they
have an Australian Financial Services Licence (AFSL) through ASIC.
Providing financial advice without an appropriate AFSL is fraud now.
We cannot see how creating an additional offence achieves anything more
in terms of consumer protection.
We also note that the terms ‘financial planner’ and ‘financial adviser’
can legitimately be used to describe business activities quite different to
those envisaged by this legislation.
While the provisions are drafted on the assumption that these terms are
only used in association with personal financial advice, they can equally be used
in association with wholesale or corporate financial advice.
For example, an investment bank providing advice to the board and
management of a corporate may reasonably describe itself as that corporate's
The following email exchange between Treasury and the committee
secretariat further demonstrates the inanity and ineptitude of the government’s
“The Secretariat’s understanding is correct.
To be able to use a restricted term, a person needs to hold
an AFSL and provide personal advice in relation to designated financial
products. Our earlier responses were meant to be read through the lens of the
provision of personal advice but we could have made that clearer.
Specifically in relation to the Secretariat’s questions –
1a – licenced to provide personal advice to both retail and
wholesale clients and therefore able to use a restricted term.
1b – not licenced to provide personal advice to either retail
or wholesale clients and therefore unable to use a restricted term.
1c – not licenced to provide personal advice to wholesale
clients and therefore unable to use a restricted term.
2 – Given that a relevant licence holder must be providing
personal advice to be able to use the restricted term, a circumstance where
only general advice was being provided would mean that the restricted term
could not be used.
Questions from the Secretariat
The committee is seeking further clarification from Treasury
about the interaction between RG 2: 53 (ASIC Regulatory Guide 2) and
the bill 923C(2) in relation to the application of restrictions on
the terms ‘financial adviser’ and ‘financial planner’ as they might apply to
persons working in the wholesale financial sector.
I asked you Question 1 this morning, but I include it here
just to keep the questions and answers together.
The secretariat asked you Question 2 which is drawn from the
Hansard record on 2 May and you replied that “The Bill does not restrict
licensees providing advice to wholesale clients from using the restricted
In addition one section in the Treasury answers to questions
on notice stated that:
“the person is not providing advice to retail clients – able
to call themselves a financial planner if licensed to provide advice to
wholesale clients. The Bill does not restrict licensees providing advice to
wholesale clients from using the restricted term.”
However, the committee is re-asking Question 2 with a
specific additional element because the committee is keen to clarify which
categories of licensees in the wholesale area are permitted to use the
restricted terms, including whether those persons licenced to provide general
financial product advice Only to wholesale clients would still be
able to call themselves a financial adviser.
regard to RG 2: 53, the secretariat is seeking clarification from
Treasury that our understanding in the following three circumstances is
If you are licenced to provide financial product advice, you
would be operating under an AFSL and you WOULD be able to call yourself
a financial adviser to both retail and wholesale clients;
If you are licenced to provide general financial product
advice, you would be operating under an AFSL, but you would NOT be able
to call yourself a financial adviser to either wholesale or retail clients
because you are not authorised to provide personal financial advice; and
If you are licenced to provide general financial product
advice Only to wholesale clients, you would be operating under an
AFSL, but you would NOT be able to call yourself a financial adviser to
wholesale clients because you are not authorised to provide personal financial
The secretariat would also like a specific answer from Treasury to the question
posed by Mr Paul Fletcher about whether the person in question would be able to
use the restricted terms if the person was licenced to
provide general financial product advice Only to wholesale
clients (RG 2:53(c)):
Mr FLETCHER: I suppose what I am wondering about is whether,
for example, this provision would cover the business operations of an
investment bank. For example, you can well imagine a CEO of a company that is
getting advice about their capital allocation between debit and equity to say:
'This is Mr Smith from Goldman Sachs'—or Merrill Lynch or Deutsche Bank or any
one of a whole bunch of other investment banks—'and he is my financial
adviser'. I am wondering whether that language would now be prohibited if this
legislation were to go through. (Hansard, 22 April 2013, Sydney, p. 25,
question originally asked of the Association of Financial Advisers)”.
Coalition members of the committee call on the government to draft the provisions
of this Bill in a way such that legitimate use of these terms, by those who are
not the intended target of this legislation, is not prevented.
We are not satisfied that the present drafting achieves this objective.
We are also concerned about the risk for further incremental increases
in regulation as a consequence of this change in legislation.
The Coalition is committed to reducing unnecessary financial services
red tape so we can put downward pressure on the cost of advice for consumers
and help ensure that high quality advice is more available, accessible and
affordable for all.
The Coalition is very supportive of efforts by organisations like the
FPA, SPAA, AFA and others to lift professional and educational standards for
financial planners/financial advisers.
We consider that such self-regulation by professional and industry
associations is a more effective and more sustainable way to continue to lift
standards in financial services related professions.
Are the terms to be enshrined the same or substantively different?
While most in the industry consider the two terms – ‘financial planner’
and ‘financial adviser’ – essentially interchangeable (ie only semantically
different), other key stakeholders consider these terms to be substantively
different. This was reinforced by the Financial Planning Association of
Australia (FPA) testimony to the hearing of the Bill’s inquiry (Hansard,
Chair: ... In your view, is there a difference between
financial advisers and financial planners?
Mr Rantall: That is a great question. We have a
personal view around that as an organisation. We believe financial planners are
more involved in a holistic approach to financial advice. We think financial
advisers are more product advisers.
Mr De Gori: I totally agree. I just want to put on the
record that this is an issue that we are dealing with internationally, as Mark
already mentioned. Other jurisdictions around the world are also dealing with
the definition—the differences between 'financial adviser' and 'financial
planner'. Some jurisdictions see them as interchangeable and others do not.
This is a constant issue that we have been dealing with.
In fact, some of the key stakeholders in the industry (eg CPA Australia,
Institute of Chartered Accountants Australia, and Deloittes – as Table 1
of page 5 of the FPA’s submission to the inquiry (Submission No. 5)
attests) support the restriction of ‘financial planner’ but not ‘financial
adviser’ – such are the differences perceived in the industry.
As such, there appears some disagreement within the industry as to
whether the terms ‘financial planner’ and ‘financial adviser’ are, or can be,
used interchangeably and, if not, where the dividing line between the two terms
lies, and whether only ‘financial planner’ should be enshrined, or the more
general term ‘financial adviser’ as well.
Regulation begets more regulation (and the need or demand for further
Clearly, the dividing line in policy terms between what ought to be enshrined,
and what ought not be, is difficult to agree upon, even within the industry.
Once a particular term(s) is enshrined, the industry will be open to
future governments meddling with the definitions and/or introducing burdensome
compliance arrangements to monitor any future requirements associated with the
definition of a ‘financial planner/adviser’.
In fact, some in the industry are already foreshadowing changes. According
to Table 1 of page 5 of the FPA’s submission, the Industry Super
Network is quoted as saying that:
... the legislation should include regulation-making powers to
provide flexibility in the future to identify additional requirements which
would need to be met in order to make use of the restricted terms.
... ensures it extends to the use of the terms when providing
advice with online tools.
In addition, some have argued for mandatory sign-plating (eg of offices
and business cards) to also be a requirement of this legislation (eg Association
of Financial Advisers – page 21 of the hearing’s Hansard).
The Coalition members of the committee caution that this should not be
the first step towards more red tape and complexity – with the costs of
business compliance being passed onto consumers for very little extra protection.
Coalition members of the Committee make the following recommendations:
That passage of the
Bill be supported in relation to the corporate bonds-related measures and not
be opposed in relation to the 'enshrinement provisions', while giving a clear
indication that any consequent incremental increases in related financial
services red tape be resisted in the future.
That the government
review the drafting of this legislation to ensure that the 'enshrinement' of
the terms 'financial planner' and 'financial adviser' as proposed in this
legislation does not prevent the current legitimate use of those terms by
businesses involved in financial services unrelated to personal financial
|Senator Sue Boyce
|Senator Mathias Cormann
|Paul Fletcher MP
||Tony Smith MP
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