The following updates were provided at the recent FSB FAIS Conference.
Fourteen RDR proposals were proposed to be implemented before implementation of the Financial Sector Regulation Act (FSRA), which was tabled in Parliament on 27 October 2015, with an effective date expected late in 2016.
The shifting of the FSRA timelines means that the original planned implementation dates for the Phase 1 proposals now moves forward by about six months to July 2016. Despite this, implementation of some specific measures still need to be consulted on, and transitional measures will apply where necessary to allow for changes to business models and systems.
New thoughts on certain proposals
Advisers may not act as representatives of more than one juristic intermediary (adviser firm)
This proposal may be modified to disallow advisers from being a representative on more than one FSP licence where the FSPs concerned are licensed for the same FAIS product categories. This is in response to arguments raised by the industry, for instance to allow advisers to obtain experience under supervision for new products and concerns raised by certain group structures.
Two new concepts were identified under this proposal:
- The same legal entity will not be permitted to hold more than one FSP licence
- The Regulator will also tighten fit and proper operational requirements and strengthen supervision of KIs to prevent “rent a KI” models.
Conflicted remuneration on RA transfers to be addressed
In the longer term, concerns are to be addressed by reduced early termination charges, including the prohibition of commission on new policies.
The industry has expressed valid concerns so, in the interim, revised replacement standards will enhance disclosure requirements on transfers of RAs, preservation fund policies and living annuities. This will include prescribed transfer documents to be signed off by trustees, where applicable.
The FSB recognises that prohibiting commission on conventional life annuities (if they are classified as investment products) may have unintended consequences. Ongoing advice fees will be difficult to justify, which in turn will discourage recommendation of these products. The position will be reconsidered in consultation with stakeholders.