What is FSRA?
Financial Services Reform Act (FSRA) is Federal legislation introduced to
bring various financial services and products under one licensing regime.
It introduces a new disclosure regime for most financial products and
establishes a standard of conduct for financial service providers with the
aim of increasing the level of compliance and competency in the financial
business that provides a "financial service" must be licensed.
Financial service includes providing financial product advise and dealing
in financial products. Another key component of the FSRA is
training. All licensees or their authorised representatives must
undergo certain prescribed training course.
commenced on 11 March 2002, with a 2-year 'transition period' to 11 March
2004, the deadline by which an Australian Financial Services License (AFSL)
creates a single licensing and disclosure regime for the financial
services industry, including:
Advisers, e.g. Accountants, CPA’s
Other financial services providers, e.g.
Who regulates FSR?
regulator is the Australian Securities and Investments Commission (ASIC).
It is responsible for enforcing company and financial services laws to
protect consumers, investors and creditors. Its authority covers
Australian companies, financial markets, financial services organisations
and professionals who deal and advise in investments, superannuation,
insurance, deposit taking and credit.
does licensing mean?
the significant effects of FSRA is to introduce a uniform licensing scheme
for people who engage in financial advice or provide financial services.
The FSRA obligates people who provide financial services to obtain an
Australian financial services licence (AFS licence) or become the
representative of a licensee. The licences issued by ASIC are called
Australian Financial Services Licences (AFSL). For instance, if a
person holds an AFSL are obligated to provide a Statement of Advice or
Financial Services Guide commences after a person obtains an AFS licence.
is a financial product?
three general concepts which form the definition of a financial product:
Making a financial investment, e.g. shares,
managed investments, superannuation, bank deposits, investment life
Managing a financial investment, e.g.
Making a non-cash payment, e.g. direct debit
facility, cheque facility, smart cards,
These product are excluded – health insurance, credit facility, funeral
benefit, direct property, wine, art and stamp collection.
What is a
legislation a person will be considered to provide a "financial service" if
deal in a
financial product advice
make a market
for a financial product
registered managed investment scheme
custodial or depository services
disclosure requirements that currently exist for financial products and
services will, in general, be replaced by the reforms in the legislation
i.e. product disclosure statements, statements of advice, and financial
includes disclosure requirements that attach to some loan services and
retirement savings accounts. These disclosure requirements apply to "retail
clients" of these services i.e. where the client is provided with a
financial product or service. It will include material information that
might reasonably be expected to influence a client's decision to acquire the
service or product.
This is a
regulated statement that applies to financial products. In general a
Product Disclosure Statement must be given by a licensed provider to a
retail client where:
Financial services guide
This is a
regulated guide that applies to financial services. In general a Financial
Services Guide must be given to a retail client by a provider of financial
services (or their authorised representatives) before the service is
Statement of advice
of Advice must be provided when personal advice is given to retail clients.
It must state the advice that is given and be provided as soon as possible.
This must be done before any service in relation to the advice is provided.
There are some exceptions to this, for example concerning telephone advice
where the client agrees.
the impact of the FSRA?
impact many financial services institutions like banks, insurance companies
and non-financial service businesses like accountants and lawyers who
traditionally provided certain financial products.
The key to
reducing the risk of non compliance to FSRA is to understand the product
and/or services you provide. There are also specific inclusions and
exclusions that apply.
If the FSRA regime does apply to you, an appropriate compliance program is
required to ensure that you stay on top of any changes and that you are
actually complying with the requirements.