• Introduction
• News
• Chronology
• Legislation, policy & links
• Contacts
• Archive
  • Introduction
    • Uniform regulation
    • Provider licensing
    • Disclosure
    • Obligations to retail clients
    • Markets licensing
    • Wholesale/retail
  • Industries
  • Transition
  • News and publications

Introduction

FSR is the sixth stage of the Government's Corporate Law Economic Reform Program. It was enacted in September 2001 to reform and consolidate regulation of the financial services sector and it covers most financial services and products (excluding credit).

• What is the effect of FSR?
• How does FSR work?
• Does this affect other law and policy?
• What doesn't FSR cover?
• FSR dates

Updated as at 11 March 2004.

What is the effect of FSR?

FSR has brought about four major changes to the way financial services are regulated:

• Broadly speaking, comparable financial products are now subject to the same rules. This includes: securities; shares and debentures; futures and derivatives; managed funds; foreign exchange; superannuation; general and life insurance; deposit accounts; and means of payments services such as smart cards and e-cash.
• Providers of financial services are subject to the same licensing regime. This covers anyone undertaking sales, offering advice or dealing in financial products. (Before FSR started, there were separate licensing requirements depending on the type of product.)
• The same disclosure standards apply to similar products.
• Financial markets, and clearing and settlement facilities, are each subject to a single licensing regime.

How does FSR work?

FSR regulates conduct in relation to financial products. Financial products include any means or facility by which a person can:

• make a financial investment (such as shares, debentures, interests in managed investment schemes, superannuation, investment life insurance and bank deposits);
• manage a financial risk (such as general insurance and derivatives used for hedging); or
• make a non-cash payment (such as debit cards, cheques, smart cards and travellers cheques).

Under FSR, people who provide certain services in relation to financial products (such as distributing, advising or dealing in those products) are subject to a single licensing regime, and have to comply with various disclosure and consumer protection requirements when dealing with retail clients. Issuers of financial products (other than shares and debentures) are subject to uniform disclosure standards when those products are sold to retail clients. As a result of FSR, operators of financial markets and clearing and settlement facilities are also subject to reformed licensing requirements and an improved regulatory framework. FSR has also extended many of the prohibitions on market misconduct and insider trading that were contained in the pre-FSR Corporations Act to a wider range of financial products and markets, and has made some other changes to the pre-FSR law (particularly in the areas of takeovers and securities transfers).

FSR distinguishes between wholesale and retail clients. While wholesale financial markets and services providers will often need to be licensed, many of the consumer protection and disclosure standards in FSR apply only to dealings with retail clients.

Does this affect other law and policy?

Yes. FSR has amended a number of Acts, including the Corporations Act, the ASIC Act, the Superannuation Industry (Supervision) legislation, the Retirement Savings Accounts Act, the Insurance Act, the Insurance Contracts Act and the Banking Regulations. (It also repealed the Insurance (Agents and Brokers) Act, although this was subject to transitional arrangements.)

FSR is made up of the Financial Services Reform Act 2001, the Financial Services Reform (Consequential Provisions) Act 2001, other FSR legislation that amends the Corporations Act, the Corporations Amendment Regulations 2001 (as amended) and numerous ASIC Policy Statements, Class Orders, guidance notes and other material. For details, go to our Legislation, policy & links page.

What doesn't FSR cover?

The most important exclusion from FSR is credit. This means that things like commercial and single consumer lending, credit cards and other forms of financial accommodation are not caught. Single merchant payment facilities such as phone cards and gift vouchers are also excluded. FSR also excludes reinsurance and health insurance.

FSR dates

FSR became law on 27 September 2001. While some of it came into effect on that date, most of FSR started on 11 March 2002, although many provisions were subject to a two-year transitional period which ended on 10 March 2004¹. So, from 11 March 2004, anyone who conducts a financial services business will generally need an Australian Financial Services Licence under the FSR regime.

Footnote

1. The implementation of the changes brought about by FSR occurred gradually. Some of it came into effect on the date of enactment (ie, 27 September 2001), including technical amendments to the takeover laws. The rules relating to market misconduct and insider trading, rules on title to and transfer of securities and some consumer protection measures (such as cooling-off and transaction confirmation requirements in relation to the sale of some financial products) took effect from 11 March 2002. The remainder of the provisions (including the requirements for financial market and clearing and settlement operators to be licensed, for financial services providers to be licensed and for financial product issuers to comply with the new disclosure standards) were subject to the two-year transitional period (starting from 11 March 2002) during which those affected were able to migrate from their pre-FSR regulatory environment to the FSR regime.