FMA boss: Adviser legislation tricky

The second phase of the new law took effect yesterday and includes licensing provisions that extend to several hundred further businesses, and a major shift in the quality of investor disclosure for financial products.

Those who will have to comply with DIMS licensing requirements under the Act have an extension until the middle of next year.

FMA boss Rob Everett said the legislation had been well drafted and the policy settings made sense.

“There was broad industry agreement that things needed to change,” he said. “That made it a smoother process, with that buy-in.”

He said the FMA had learnt to engage with the sector more effectively, had allocated more resources to talking to the parts that were most affected and had been willing to change things in response to consultation. “That’s part of being a modern regulator.”

Everett acknowledged there were still concerns about how workable the DIMS rules would be. He said it was hard to craft legislation for advisers because of the range of business models they used. “Other parts [of the industry] are easier to licence and regulate. It’s not that they’re one-size-fits-all but they’re less disparate.”

The introduction of the FMCA does not mean the end of legislative overhaul. The Financial Advisers Act is to be reviewed next year, for implementation in 2016.

Everett said the FMA and MBIE wanted to take a comprehensive approach to the review. “It’s not necessarily that we expect everything to be changed and rewritten… but the instinct is not to do a narrow, selective review but a much broader look at it right across the piece.”

He said it was important to keep the end user in mind. The initial version of the FAA had made assumptions about what would benefit users that had not been borne out, he said.

A recent ASIC report was critical of high commission levels driving poor insurance advice. Everett said it would be interesting to see what further steps the Australian regulator took.

He said FMA had spoken about the effects of commission but said its focus was on ensuring that sector players understood the ways that incentives drove behaviour.

Comments from our readers

On 2 December 2014 at 8:59 am AFA said:

DIMS was not on the FMA's radar until they got caught with their pants down over the Ross affair. Now, in typically bureaucratic fashion, they have responded with regulatory overkill. But for advisors who offer DIMS to wholesale clients only, none of the new regulatory nonsense applies - no doubt to the chagrin of the bureaucrats. For the purposes of DIMS, a "wholesale" investor needs to own financial products or $1 million or more. But for giving financial advice, wholesale means $1 million in net assets (which would include property)

FMA boss: Adviser legislation tricky

Changes to DIMS regulation have been more complicated and less satisfactory to the financial services sector than those who crafted the Financial Markets Conduct Act first thought, the Financial Markets Authority’s chief executive says.

Tuesday, December 2nd 2014, 6:00AM 1 Comment

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