ASIC releases technical updates to RG 246
ASIC today released technical updates to Regulatory Guide 246 Conflicted and other banned remuneration (RG 246) to reflect recent changes to the law.
The updates to RG 246 reflect:
- the end of the grandfathering of conflicted remuneration for financial product advice from 1 January 2021; and
- the extension of the ban on conflicted remuneration to stamping fees paid in relation to listed investment companies and listed investment trusts (excluding real estate investment trusts) that took effect on 1 July 2020.
The ban on conflicted remuneration for financial product advice applies to all benefits given on or after 1 January 2021. Product issuers are required to provide rebates to clients for all previously grandfathered benefits that they remain legally obliged to pay on or after 1 January 2021.
ASIC will continue to monitor industry’s arrangements in relation to the ban on conflicted and other banned remuneration and will consider taking action where we find misconduct.
The updated RG 246 also clarifies that the law does not prescribe a timeframe for repaying commissions that are being clawed back where a life insurance policy has been cancelled or reduced in the first two years. This is consistent with the guidance previously published on the ASIC website.
The Financial Services Royal Commission Final Report recommended that the grandfathering of conflicted remuneration end as soon as is reasonably practicable (Recommendation 2.4).
The Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Act 2019 commenced on 28 October 2019 and amended the Corporations Act 2001 (Corporations Act) to ban the grandfathering of conflicted remuneration paid to financial advisers from 1 January 2021. The legislation also established a framework for rebating previously grandfathered benefits to affected clients.
The Corporations Amendment (Stamping Fee Exemption) Regulations 2020 amended regulation 7.7A.12D of the Corporations Regulations 2001 to the effect that stamping fees paid in respect of listed investment companies and listed managed investment schemes on or after 1 July 2020 are conflicted remuneration and prohibited under Division 4 of Part 7.7A of the Corporations Act.
Regulatory Guide 246 Conflicted and other banned remuneration