In this final Financial Law Insight for 2017, we look back on what has been a fairly tumultuous year for the financial advice reform process. That year has now been capped off by an accelerated call for submissions on the FSLAB, giving the reforms a chance at meeting the timeframe originally proposed – although we have our doubts.
When the exposure draft of the FSLAB was released for consultation in February 2017, the timing contemplated was for transitional financial advice provider licensing to commence in the first quarter of 2019.
That timeframe was widely recognised at the time as being aggressive. By the time the FSLAB was introduced, timing for the commencement of the new regime had been pushed out to around May 2019, factoring in nine months from the finalisation of the new Code of Professional Conduct for financial advice services.
As recently as early December, MBIE were talking about the first reading of the FSLAB being deferred until next year, with a possible six month delay in the proposed timeframe. Now we have not only had the first reading of the FSLAB, Parliament has called for submissions. This is a remarkable turnaround.
Isn’t the 23 Feb timing quite tight?
The gap between the call for public submissions and the submissions closing date is actually quite generous in the usual scheme of things. Normally, you would only have six weeks from the date of calling for submissions, and the closing date for getting in your submission. The Christmas / New Year close down period has been factored into the timing.
What has not been factored into that timing is the ability of stakeholders to marshal their resources in time to formulate a properly thought out set of submissions, given the time of year.
To help address that concern, over the past few months we have been progressing our financial advice reform series of Financial Law Insights, offering our thoughts on selected topics to break down what is a pretty complex set of reforms into manageable bites. The Series currently stands at 12, which seems a fitting pre-Christmas number. There are two more that will be released in January, when we will look at the statutory exclusions from the regime, as well as the penalties and disciplinary aspects of FSLAB.
The Series is intended to provide would-be submitters with a handy set of reference points for formulating their own submissions. The key elements of the proposed new regime that we aren’t covering off in our Series – competency requirements, licensing, and disclosure obligations – are going to be subject to their own development and consultation processes outside of the detail of FSLAB itself.
So what next?
Once submissions have closed, the Select Committee will hear from those submitters who wish to speak to their submission, with the Committee then reporting back to Parliament by 7 June 2018 (although the House can extend this).
Early indications are that the Select Committee will look to report back in a swifter timeframe, recognising that there has already been a consultation draft and an extensive exposure period for FSLAB. However, it would be a shame if the marathon that has been the financial advice reform process is compromised through a final mad dash sprint to the finish line. There’s still quite a few points of detail that will take time to thrash out.
Underpinning the new financial advice regime, of course, is the Code of Professional Conduct for financial advice services. The Code Working Group still has a long way to go in developing a new Code following this year’s focus group sessions, with a more comprehensive consultation expected in Q1 2018. Fast tracking FSLAB may provide certainty for the Code Working Group in the statutory details of the regime it is developing the Code for, but it remains critical for its work to be concluded in a well-considered manner. Having the Code finalised by August 2018 to support the commencement of transitional licensing for financial advice providers in May 2019 remains a challenging target.
But isn’t the die cast?
With all of the consultation that has occurred to date, it might be tempting to think that there is no point in submitting. Surely all the key decisions have already been locked-in? We don’t think so.
The extent of the debate that has gone on since FSLAB was introduced back in August is such that a few cracks in what had been proposed, and some unintended consequences, have been identified. We also have a new Government in power, no doubt eager to ensure that its mark is squarely stamped on the new regime.
What this means is that it is highly likely there will be movement on the detail of some of the key elements of the regime. Some of that movement might be pivotal for many stakeholders in finalising their strategies to respond to the reforms. The current submission process represents a final chance for financial advice providers to have a say in shaping their destiny.
It’s an exciting time for the regulation of financial advice services. It’s now possible we might reach the end of the current reform process faster than had been anticipated at the start of the month, but there’s still a lot of water to flow under the bridge.
We will be making a submission on FSLAB, and encourage our readers to do likewise. The Minister has clearly indicated that he will listen. That only works if there are voices for him to hear.
Start a conversation
If you would like a specific briefing on FSLAB, would like help identifying the key elements of the reforms that are going to impact on your business strategy, or would like assistance with preparing a submission, please contact Catriona Grover on +64 4 498 0816, David Ireland on +64 4 498 0840, Nick Summerfield on +64 9 915 3357, or Tom McLaughlin on +64 4 498 0886, or email the team at email@example.com.