IFSA puts its shoulder to the CLERP 6 wheel

As foreshadowed in a previous column, IFSA has completed its submission on the CLERP 6 consultation paper on financial products, service providers and markets. Many submissions on CLERP deal with a limited number of issues of concern to the authors. IFSA's 66-page effort will no doubt be one of the more complete submis-sions in the in-tray of Financial Services Minister Joe Hockey.

The message from within the Government is that the Minister and his team are now reading each of the 100 or so sub

As foreshadowed in a previous column, IFSA has completed its submission on the CLERP 6 consultation paper on financial products, service providers and markets. Many submissions on CLERP deal with a limited number of issues of concern to the authors. IFSA's 66-page effort will no doubt be one of the more complete submis-sions in the in-tray of Financial Services Minister Joe Hockey.

The message from within the Government is that the Minister and his team are now reading each of the 100 or so submissions and are on track to release draft leg-islation in the middle of the year. This will be followed by a three-month con-sultative phase which will culminate with the introduction of the CLERP 6 legis-lation for passage during the spring sittings of Parliament.

Money Management readers who hold licences and/or give advice on securities or insurance will no doubt be interested in what IFSA has submitted to Minister Hockey.

Limited advisery licences

IFSA supports the view in the paper that there be certain activities, not amounting to specific recommendations or personal advice, for which no licence or representative's authority should be required. However, we recommend that the boundaries of such activities need to be much more clearly drawn.

We also support the Government's position that limited licences can be issued where advice is to be restricted to a limited range of financial products or services. This will permit advisers to provide services to their customers in their specialist fields. For example, a person can be expert in, say, risk in-surance products sold by life insurers without wishing to also provide services in the investment products field.

The IFSA submission recommends that the Government clarify liability issues arsing where an authorised representative has given advice that is within the bounds of the limited authority and where the limitations of such advice have been clearly divulged. If the consumer subsequently takes actions outside of these clear boundaries, the licence holder should not be held responsible.

Where will superannuation trustees fit under the CLERP net?

Another pressing licensing issue is the position of superannuation trustees vis a vis the information available to prospective fund members. A new employee will often be automatically enrolled in a superannuation plan on commencing employ-ment. There are at present special rules under SIS governing when point-of-sale documentation and any necessary advice is provided to new members in a group scheme.

IFSA believes that the SIS rules on the special responsibilities of the trustee will be superseded by CLERP. IFSA recommends that CLERP legislation must be very clear on the relative responsibilities of the employer, trustee, and any author-ised representative concerned. Consideration will need to be given to the type of licence (if any) that trustees may need to hold.

Funding

The IFSA submission again points to the need for a transparent and logical basis for calculating annual licensing fees. Basically, the IFSA position is that the new CLERP legislation should set out the basis for future fees and provide that there be mandatory industry consultation.

Multi-agents

The two-year transition period to apply to existing market players is welcomed in IFSA's submission. However, the suggested treatment of established insurance multi-agents during the transition period could lead to impractical and perhaps unconscionable outcomes. It would increase the liability of licensees and would confuse consumers, so lowering the level of consumer protection.

The IFSA solution entails a continuation of the present form of limited cross endorsements for the period of the transition, or until conversion to the new licensing regime. IFSA suggests there should be safety net regulatory provi-sions, enabling ASIC to take steps to address any market failures relating to the transition, although IFSA considers these to be highly unlikely.

Codes of conduct

The proposal to allow industry to establish best practice codes of conduct to augment statutory provisions is endorsed by IFSA. However, it is recommended that the Government review the proposal that such codes not be binding on all industry participants.

At issue here is whether certain players can gain some sort of competitive ad-vantage by operating outside the regulatory overlay, and the associated costs, that inevitably come with an industry code of practice.

As IFSA moves towards finalising its own code of practice, and as it finalises its industry standards and guidelines, this issue will come under a more intense focus. Hopefully, the ultimate legislation will take this issue into account.

So, if there is a message on CLERP 6 for the Government from IFSA it is this: Keep this agenda moving, try to finalise the legislation in this calendar year, and produce outcomes that will make the provision of advice more certain and ef-ficient. Consumers will be the victors if this advice is taken.

In our next column we discuss IFSA stance on the proposed disclosure regime.

Richard Gilbert is the deputy chief executive of the Investment and Financial Services Association (IFSA).

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