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CORPORATIONS ACT 2001

CHAPTER 7 - FINANCIAL SERVICES AND MARKETS    View history reference

PART 7.7A - BEST INTERESTS OBLIGATIONS AND REMUNERATION    View history reference

Division 4 - Conflicted remuneration    View history reference

Subdivision B - What is conflicted remuneration?    View history reference

SECTION 963B  MONETARY BENEFIT GIVEN IN CERTAIN CIRCUMSTANCES NOT CONFLICTED REMUNERATION  

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963B(1)  

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Despite section 963A, a monetary benefit given to a financial services licensee, or a representative of a financial services licensee, who provides financial product advice to persons as retail clients is not conflicted remuneration in the circumstances set out in any of the following paragraphs:


(a) the benefit is given to the licensee or representative solely in relation to a general insurance product;


(b) the benefit is given to the licensee or representative solely in relation to a life risk insurance product, other than:


(i) a group life policy for members of a superannuation entity (see subsection (2)); or

(ii) a life policy for a member of a default superannuation fund (see subsection (3));


(c) each of the following is satisfied:


(i) the benefit is given to the licensee or representative in relation to the issue or sale of a financial product to a person;

(ii) financial product advice in relation to the product, or products of that class, has not been given to the person as a retail client by the licensee or representative in the 12 months immediately before the benefit is given;


(d) the benefit is given to the licensee or representative by a retail client in relation to:


(i) the issue or sale of a financial product by the licensee or representative to the client; or

(ii) financial product advice given by the licensee or representative to the client;


(e) the benefit is a prescribed benefit or is given in prescribed circumstances.

Note: Under the governing rules of some regulated superannuation funds, a member may seek advice on the basis that the trustee of the fund will pay the licensee or representative for the advice and then recover the amount paid from the assets of the fund attributed to that member. In that case, the member has caused or authorised the amount to be paid to the licensee or representative and so, because of section 52 of this Act, paragraph (1)(d) would apply to that amount. This does not affect the trustee's obligations under section 62 of the Superannuation Industry (Supervision) Act 1993 (which deals with the purposes for which a trustee may act in maintaining a regulated superannuation fund).

[CCH Note 1: S 963B(1) will be amended by No 6 of 2017, s 3, Sch 1[7], by substituting "A" for "Despite section 963A, a" (effective 1 January 2018).]

[CCH Note 2: S 963B(1) will be amended by No 6 of 2017, s 3, Sch 1[8], by substituting para (b) and inserting para (ba) (effective 1 January 2018). Para (b) and (ba) will read:


(b) each of the following is satisfied in relation to the benefit:

(i) the benefit is given to the licensee or representative in relation to a life risk insurance product or life risk insurance products;

(ii) none of the products is a group life policy for members of a superannuation entity (see subsection (2)) or a life policy for a member of a default superannuation fund (see subsection (3));

(iii) either:

(A) the benefit ratio for the benefit is the same for the year in which the product or products are issued as it is for each year in which the product or products are continued; or

(B) the benefit ratio requirements and clawback requirements in section 963BA are satisfied in relation to the benefit;


(ba) the benefit is given to the licensee or representative in relation to consumer credit insurance;

]

[CCH Note 3: S 963B(1) will be amended by No 6 of 2017, s 3, Sch 1[9], by inserting "in relation to a financial product other than a life risk insurance product" after "each of the following is satisfied" in para (c) (effective 1 January 2018).]

[CCH Note 4: S 963B(1) will be amended by No 6 of 2017, s 3, Sch 1[10], by substituting "the financial product" for "a financial product" in para (c)(i) (effective 1 January 2018).]

963B(2)  

A life risk insurance product is a group life policy for members of a superannuation entity if the product is issued to an RSE licensee of a registrable superannuation entity, or a custodian in relation to a registrable superannuation entity, for the benefit of a class of members of the entity.

963B(3)  

A life risk insurance product is a life policy for a member of a default superannuation fund if:


(a) the product is issued to an RSE licensee of a registrable superannuation entity, or a custodian in relation to a registrable superannuation entity, for the benefit of a person who is a member of the entity; and


(b) the person has not given written notice to an employer of the person that the fund is the person's chosen fund, but the employer of the person makes contributions to the fund for the benefit of the person.

Note: Superannuation guarantee surcharge may be imposed on an employer if the employer does not make contributions to a superannuation fund for the benefit of its employees. If an employee does not notify the employer of the employee's chosen fund, the employer is still able to satisfy its obligations by making contributions to certain funds (see the Superannuation Guarantee (Administration) Act 1992).

[CCH Note: S 963B(3A)-(3C) will be inserted by No 6 of 2017, s 3, Sch 1[11] (effective 1 January 2018). S 963B(3A)-(3C) will read:


963B(3A) The benefit ratio for a benefit given to a financial services licensee, or a representative of a financial services licensee, in relation to a life risk insurance product, or life risk insurance products, for a year is the ratio between:


(a) the benefit; and


(b) the policy cost payable for the product or products, or that part of the policy cost payable for the product or products to which the benefit relates, for the year.


963B(3B) The policy cost for a life risk insurance product, or products, for a year is the sum of:


(a) the premiums payable for the product, or products, for that year; and


(b) any fees payable for that year to the issuer of the product or products for that issue; and


(c) any additional fees payable because the premium for the product, or products, is paid periodically rather than in a lump sum; and


(d) any other amount prescribed by the regulations for the purposes of this paragraph.


963B(3C) However, the policy cost for a life risk insurance product, or products, does not include any amount prescribed by the regulations for the purposes of this subsection.

]

963B(4)  

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The regulations may prescribe circumstances in which, despite a provision of this section, all or part of a benefit is to be treated as conflicted remuneration.

Note: The expression intrafund advice is often used to describe financial product advice given by a trustee (or an employee of, or another person acting under arrangement with, the trustee) of a regulated superannuation fund to its members, where that advice is not of a kind to which the prohibition in section 99F of the Superannuation Industry (Supervision) Act 1993 applies. (Section 99F of that Act prohibits trustees of regulated superannuation funds from passing on the cost of providing certain kinds of financial product advice in relation to one member of the fund to another.)

[CCH Note: S 963B(5) will be inserted by No 6 of 2017, s 3, Sch 1[12] (effective 1 January 2018). S 963B(5) will read:


963B(5) This section applies despite section 963A and any regulations made for the purposes of section 963AA.

]

[CCH Note: S 963BA will be inserted by No 6 of 2017, s 3, Sch 1[13] (effective 1 January 2018). S 963BA will read:

SECTION 963BA BENEFIT RATIO AND CLAWBACK REQUIREMENTS  

Benefit ratio requirements


963BA(1) The benefit ratio requirements are satisfied in relation to a benefit given to a financial services licensee, or a representative of a financial services licensee, in relation to a life risk insurance product, or life risk insurance products, if the benefit ratio for the benefit for:


(a) the year in which the product or products are issued; and


(b) each year during which the product or products are continued;

is equal to or less than that determined by ASIC under subsection (2) as an acceptable benefit ratio for that year.


963BA(2) ASIC may, by legislative instrument, determine an acceptable benefit ratio, or a way of working out an acceptable benefit ratio, for a benefit for a year.

Clawback requirements


963BA(3) The clawback requirements are satisfied in relation to a benefit given to a financial services licensee, or a representative of a financial services licensee, in relation to a life risk insurance product, or life risk insurance products, if:


(a) the arrangement under which the benefit is payable includes an obligation to repay all or part of the benefit if:


(i) the product, or one of the products, is cancelled or is not continued, other than because a claim is made under the insurance policy or because other prescribed circumstances exist; or

(ii) the policy cost for the product, or one of the products, during a year or across 2 years is reduced, other than in prescribed circumstances;

within 2 years after the product is first issued to a retail client; and


(b) the amount to be repaid under the obligation is equal to or greater than the amount determined by ASIC under subsection (4) as an acceptable repayment.


963BA(4) ASIC may, by legislative instrument, determine the amount, or a way of working out the amount, that is an acceptable repayment for the purposes of paragraph (3)(b).

]


 



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