When does it take effect?

The legislation contains a two year transitional period for those industry participants to make the transition to the new regulatory regime. But this is not entirely straightforward. For instance, rules about disclosure statements will not usually apply to existing financial products for a period of up to two years beginning on 11 March 2002 and ending when the provider either elects to opt in the scheme or at the end of the transition period. Check with the provider whether they are subject to the regulatory regime.

What is a financial service?

Under the legislation a person will be considered to provide a "financial service" if they:

What about mortgages?

Credit facilities are not a "financial product" for the purposes of the legislation. Therefore, advice about or dealing in credit facilities (e.g. a home loan or mortgage) is not covered by the FSRA. However, if the advice about a loan is given together with advice about a financial product, it may be covered by the regime. For instance, this might occur if you are advised about the benefits of a loan to invest in real estate as compared with other investments such as securities.

Disclosure

The various 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 services guides.

This includes disclosure requirements that attach to some loan services (see above) 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.

Product disclosure statement

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) to a retail client before the service is provided where:

Statement of advice

A Statement 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.

Licensed providers

One of the significant effects of the Financial Services Reform Act is to introduce a uniform licensing scheme for people who engage in financial advice or provide financial services. For instance, if a person holds an Australian financial services licence (AFS licence), they are obligated to provide a Statement of Advice or Financial Services Guide commences after a person obtains an AFS licence.

The FSRA obligate people who provide financial services to obtain an Australian financial services licence (AFS licence) or become the representative of a licensee.

Read this: This fact sheet is intended to be general information about the law in Australia. It is not a substitute for legal or other professional advice. LAwscape Communications Pty Ltd, Fairfax Interactive Pty Ltd or MoneyManager does not accept responsibility for loss to any person, who either acts or does not act because of this fact sheet.

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