Treatment of Non PID Brokerage under FOFA

[Archived User]

Our business is an AFSL holder and shadow participant (non PID) of the ASX that specialises in direct equities advice (personal advice) to retail clients.  We currently charge a traditional brokerage % subject to a minimum contract note fee.  The owner of the business is also an adviser and the business employs another adviser.  We are seeking views/clarification on how a business of this type will be treated under FOFA as it applies to Non PID brokerage?  We have received conflicting opinions from 2 sources and are seeking another view. Welcome any thoughts.

 

Thanks

[Mark Harbert]

Other factors need to be considered in making a proper determination such as whether you receive any rebates from the market participant placing your trades, whether the commission is one off or ongoing and what other financial products you offer over and above the securities.  However, with the information provided I have provided the following details.

 

FOFA will be relevant to your question in relation to conflicted remuneration.  Your business will fall within the conflicted remuneration rules if the remuneration for your business could reasonably be expected to influence the choice of financial product recommended by your advisers, or could reasonably be expected to influence the financial product advice given.

 

If your organisation operates as financial planners offering multiple products but happen to specialise in securities and share trading you are likely to be caught by the conflicted remuneration provisions.  This is because it will most likely be in the adviser’s interest to recommend a security that attracts this commission over and above any other financial product that may not attract such commission and where the other financial product may have been better for the client.

 

It is difficult to form a definite conclusion in this regard without knowing more details of the manner in which your business operates.  There are also a number of exemptions to the conflicted remuneration rules.

 

We would recommend contacting us so that we can find out more about your business and provide a more thorough answer.

 

Author: David Court

Co-contributor: Mark Harbert

 

[Author]

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