In Whose Best Interests? Regulating Financial Advisers, the Royal Commission and the Dilemma of Reform

42 (1) Sydney Law Review (2020)

32 Pages Posted: 21 Sep 2020

See all articles by Han-Wei Liu

Han-Wei Liu

Monash University

Toan Le

Monash University - Faculty of Law

he weiping

affiliation not provided to SSRN

Michael Duffy

Monash University

Date Written: May 1, 2020

Abstract

Following the Future of Financial Advice reforms, the ‘suitability’ and ‘appropriateness’ focus for financial advice has been relocated and supplemented by a ‘best interests’ focus in s 961B of the Corporations Act 2001 (Cth). Yet, as the Australian Government’s Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has pointed out, structural issues may often work against best interests being paramount. Further, moves to make the statutory obligation replicate a fiduciary obligation have been resisted in the consultative process that developed s 961B and related obligation sections and any replication is far from clear. Another key issue is the extent to which aspects of the best interests duty are satisfied by a ‘tick a box’ approach. This aspect of s 961B is said to provide ‘safe harbour’ for advisers, yet has been criticised by the Royal Commission as more procedural rather than substantive. However, removing the safe harbour altogether may create more problems than it solves. We argue that a catch-all provision in s 961B(2)(g) preserves substantive flexibility, and caution against any reform that leaves no procedural guidance for financial advisers to anchor their behaviour in fulfilling the best interests duty.

Keywords: Best Interests Duty, FOFA Reform, Banking Royal Commission, Financial Advisers

JEL Classification: K1, K20, K22, K23

Suggested Citation

Liu, Han-Wei and Le, Toan and weiping, he and Duffy, Michael, In Whose Best Interests? Regulating Financial Advisers, the Royal Commission and the Dilemma of Reform (May 1, 2020). 42 (1) Sydney Law Review (2020), Available at SSRN: https://ssrn.com/abstract=3678359

Han-Wei Liu (Contact Author)

Monash University ( email )

900 Dandenong Road
Caulfield, Victoria 3145
Australia

HOME PAGE: http://https://research.monash.edu/en/persons/han-wei-liu

Toan Le

Monash University - Faculty of Law ( email )

Wellington Road
Clayton, Victoria 3800
Australia

He Weiping

affiliation not provided to SSRN

Michael Duffy

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

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