The financial services laws you should know

• There are a number of laws applicable to the financial services industry.
• These laws protect consumers and say what financial advisers can and cannot do.
• But laws are only as good as their enforcement. Australian financial regulators are often criticised for not being tough when financial advisers break the law.

The financial services industry is 'young' compared with other professions, such as medicine and law. It's still finding its feet and establishing its standards.

There is legislation (laws made by Parliament) that governs the financial services industry, and related industries, in terms of obligations and standards that advisers must meet when providing advice to you, the client. Following is a brief description of these laws and their purpose.

Corporations Act

The Corporations Act 2001 (Corporations Act) governs the financial services industry. The main area of the Corporations Act affecting financial advisers is the provision of financial products or financial advice to the public.

Better Advice Act

The Financial Sector Reform (Hayne Royal Commission Response-Better Advice) Act 2021 (Better Advice Act) introduced a single registration and disciplinary system for financial advisers who provide (tax) financial advice services and required all financial advisers to be registered with ASIC from February 16, 2024.

Code of Ethics

The Financial Planners and Advisers Code of Ethics 2019 sets out principles and core values in the areas of ethical behaviour, client care, quality process and professional commitment with which financial advisers must comply.

Delivering Better Financial Outcomes

The federal government's Quality of Advice Review (QAR) Final Report recommended making financial advice more accessible and affordable, and addressing current regulation of financial advice focusing more on providers than consumers.

In response, the first tranche (Schedule 1) of the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act 2024 (DBFO Act) was introduced to reduce unnecessary red tape that can impact the time and cost of preparing financial advice.

DBFO Tranche 1 received Royal Assent on July 9, 2024, and its various changes will commence at different times; namely:

• clarifying the legal basis around using superannuation to pay for financial advice
• streamlining the Corporations Act's ongoing fee
• renewal and consent requirements
• removing the obligation to provide a fee disclosure statement (FDS)
• allowing more flexibility around meeting financial services guide (FSG) requirements
• introducing client consent requirements for advisers receiving life insurance commissions
• providing clarity on the conflicted remuneration provisions.

Superannuation Industry (Supervision) Act

The Superannuation Industry (Supervision) Act 1993 (SIS Act) provides the framework for regulation of superannuation funds. It sets out rules and clarifies the duties of trustees, for instance, external audit requirement, complaints handling, and information disclosure and member participation in the management of superannuation funds.

National Consumer Credit Protection Act

The National Consumer Credit Protection Act 2009 (National Credit Act) regulates credit activities, such as loans, mortgage broking, credit contracts, consumer leases, related mortgages and guarantees, and credit services. It is designed to uphold responsible lending standards.

AML/CTF Act

The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) is designed to prevent money laundering and terrorism financing by placing obligations on "reporting entities", for instance, banks that provide "designated services". This includes collecting and verifying certain "know your customer" (KYC) information. Businesses that are required to comply with the AML/CTF Act are also required to comply with the Privacy Act 1988 when handling personal information collected in relation to AML/CTF Act obligations.