Australian Financial Services Licensing (AFSL) Forum

This topic contains 3 replies, has 3 voices, and was last updated by  amelia-w 8 years, 5 months ago.

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  • #3173 Reply

    licencefx
    Member

    If you give general advice through trade recommendations, under the new FOFA rules can you still earn rebates from FX brokers? Is it correct to say, they are not conflicted renumeration as it does not affect the choice of finanical product being recommended and it is not volume based as it is not based on the value or volume threshold as in RG246.85 and 246.86

    #3174 Reply

    Megan Jaksa
    Member

    Whether the rebate will fall within the conflicted remuneration provisions will depend on how this rebate is paid and structured.

    Conflicted remuneration is defined as any benefit given to an AFSL holder or representative that could reasonably be expected to influence the choice of financial product recommended by the licensee to retail clients, or could reasonably be expected to influence the financial product advice given by the licensee to retail clients. While volume-based benefits are presumed to be conflicted remuneration under s963L, benefits that are not volume-based may also be conflicted remuneration and therefore banned.

    If the rebate is paid to you in response to your recommendation of certain products, the rebate could reasonably expected to influence the products you recommend to your retail clients. If so, it may be regarded as being conflicted remuneration. This is true even if you just provide general advice.

    The Corporations Act also prohibits product issuers or sellers from giving an AFSL holder or representative conflicted remuneration.

    It is difficult to determine whether a rebate will be conflicted remuneration without knowing specific details about the proposed benefit. You may wish to seek legal advice to ensure you are compliant with the financial services laws prior to 1 July 2013.

    If you require further information, please contact our office to discuss.
    Author: David Court

    Co-contributor: Megan Jaksa

    #3196 Reply

    licencefx
    Member

    A client writes a weekly newsletter about FX and gives recommendations to buy different pairs from time to time and earns a rebate from the FX broker when the clients trade.

    As they only give advice in FX, and not various different managed funds etc, Does that count as 1 product and therefore the rebate could not influence the advice given as you only give advice in FX?

    #3206 Reply

    amelia-w
    Member

    Hi licencefx,

    Without a detailed understanding of the situation there’s not a straight forward answer to your question.  This is a complex area of law with a number of possible outcomes depending on a range of circumstances. We’d recommend seeking legal advice to obtain a comprehensive answer.  You’re welcome to contact us at law@hnlaw.com.au if you think we can be of help.

    Author: David Court

    Co-contributor: Amelia Walsh

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Reply To: Forex IB and FOFA

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