LIF exposure draft confirms centrality of ASIC
The Government's exposure draft legislation relating to the implementation of the new Life Insurance Framework (LIF) has made clear the level of involvement and discretion which will be granted to the Australian Securities and Investments Commission (ASIC) to remuneration and the clawback.
The exposure draft legislation was made public by the Assistant Treasurer, Kelly O'Dwyer, late yesterday, and the associated explanatory memorandum has served to give life/risk advisers a detailed overview of how the framework will work in reality.
And, in summarising the proposed new law, the explanatory memorandum states that the proposed legislation "amends the Corporations Act to give ASIC the power to specify, by instrument, the criteria which must be satisfied for certain life risk insurance products to be exempt from the ban on conflicted remuneration".
It said that the criteria ASIC is empowered to specify in the ASIC Instrument are:
- The ratio between the benefit payable to a financial services licensee, or a representative of a financial services licensee, who provides financial product advice in relation to a life risk product, or products and the amount payable for the product, or products, to which the benefit relates.
- The amount, or way of working out the amount, that is an acceptable payment that is to be repaid under clawback.
The explanatory memorandum said that, in essence, the new legislative "gives ASIC the power to create an instrument specifying the percentages of acceptable commissions in the first and subsequent years of a policy, and the amount which will be clawed back over the two year clawback period".
The Government has invited submissions on the exposure draft legislation with the time frame for submissions closing on 4 January.
Both the Association of Financial Advisers (AFA) and the Financial Planning Association are reviewing the exposure draft legislation, with AFA chief executive, Brad Fox having expressed concern at the relatively short time-frame for the receipt of submissions.
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