Commonwealth Consolidated Regulations

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CORPORATIONS REGULATIONS 2001 - REG 7.7.09A

Situations in which Statement of Advice is not required: small investments threshold

             (1)  For subparagraph 946AA(1)(a)(i) of the Act, the threshold amount is $15 000.

             (2)  Subregulations (3) and (4) apply to each of the following financial products:

                     (a)  shares;

                     (b)  rights issues;

                     (c)  options over unissued shares;

                     (d)  partly paid shares;

                     (e)  debentures;

                      (f)  stapled securities.

             (3)  For small investment advice to a client that is related to the acquisition of one or more of the financial products listed in paragraphs (2)(a) to (f), the threshold amount in subregulation (1) must be calculated to include the total value of all financial investments that would be committed to by the client if the advice were accepted by the client.

Examples:

1                 If the small investment advice related to the purchase of options over unissued shares the total cost of the options would be both the cost to buy the options and the cost of the exercise price on the face of the options.

2                 If the small investment advice relates to the purchase of partly paid shares the total cost of the shares must be calculated as if all calls had been made on the shares.

Note:          The total value of all financial investments in relation to which small investment advice is provided is calculated in accordance with subsection 946AA(2) of the Act.

             (4)  For small investment advice to a client that is related to the disposal of one or more of the financial products listed in paragraphs (2)(a) to (f), the threshold amount in subregulation (1) must be calculated to include the total value of all financial investments that would be disposed of by the client if the advice were accepted by the client.

Note:          The total value of all financial investments in relation to which small investment advice is provided is calculated in accordance with subsection 946AA(2) of the Act.

             (5)  Subregulations (6) and (7) apply to each of the following financial products:

                     (a)  superannuation;

                     (b)  managed investment schemes;

                     (c)  non-derivative instalment warrants.

             (6)  For small investment advice to a client that is related to the acquisition of one or more of the financial products listed in paragraphs (5)(a) to (c), the threshold amount in subregulation (1) must be calculated to include:

                     (a)  both:

                              (i)  the cost to the client of the initial investment; and

                             (ii)  other amounts that would be committed to by the client if the advice is taken; and

                     (b)  if the investment is not finite--the value of the investment is calculated for the 12 - month period beginning from the date that the record of advice is required by subregulation (10), (11) or (12) to be given to the client.

Examples:

1                 Advice given in relation to switching superannuation funds

                   A person earning $50 000 per annum is given advice to switch an existing superannuation fund balance of $12 000 to another superannuation fund and direct all future superannuation guarantee contributions to that same fund. In this event the total of the superannuation guarantee contributions in the first 12 - month period (ie $50 000 × 0.09 = $4 500) when added to the initial $12 000 transfer, would exceed the $15 000 threshold. In this example the exemption, in section 946AA of the Act, from the requirement to provide a Statement of Advice would not apply.

2                 Advice given to acquire non-derivative instalment warrants

                   The terms of the non - derivative instalment warrants are that $10 000 must be paid initially, a second payment of $12 000 in 18 months time and a third and final payment of $12 000 in 3 years time. The investment advice, assuming the client has committed to implementing the advice, concerns a $34 000 investment and therefore the exemption, in section 946AA of the Act, from the requirement to provide a Statement of Advice would not apply.

Note:          The total value of all financial investments in relation to which small investment advice is provided is calculated in accordance with subsection 946AA(2) of the Act.

             (7)  For small investment advice to a client that is related to the disposal of one or more of the financial products listed in paragraphs (5)(a) to (c), the threshold amount in subregulation (1) must be calculated to include:

                     (a)  the value to the client of the total divestment; and

                     (b)  other amounts reasonably related to the divestment that would be expended if the advice is taken.

Note:          The total value of all financial investments in relation to which small investment advice is provided is calculated in accordance with subsection 946AA(2) of the Act.

             (8)  If the total value of an investment, to which investment advice to a client relates, is not able to be ascertained under subsection 946AA(2) of the Act, the investment advice is taken to exceed the threshold amount in subregulation (1).

             (9)  If an investment, to which investment advice relates, is jointly held by more than 1 client, the sum of the values of each client's investment must be calculated to determine whether the threshold amount in subregulation (1) is exceeded.

When record of advice is given

           (10)  For subsection 946AA(4) of the Act, a record of advice is required to be given to a client when, or as soon as practicable after, investment advice is provided to the client and, in any event, subject to subregulation (12), before the providing entity provides the client with any further financial service that arises out of or in connection with the investment advice.

Statement of certain information if record of advice not given when advice provided

           (11)  If the record of advice is not given to the client when the investment advice is provided, the providing entity must, at the time the investment advice is provided, give the client a statement that contains the information that would be required to be in a Statement of Advice by:

                     (a)  paragraphs 947B(2)(d) and (e) of the Act; or

                     (b)  paragraphs 947C(2)(e) and (f) of the Act;

as the case requires, and by section 947D of the Act, if applicable.

Time-critical cases

           (12)  If:

                     (a)  a client expressly instructs that they require a further financial service to be provided immediately, or by a specified time; and

                     (b)  the further financial service arises out of, or in connection with, the investment advice given to the client; and

                     (c)  it is not reasonably practicable to give a record of advice to the client before the further service is provided as so instructed;

the providing entity must give the client the record of advice:

                     (d)  unless paragraph (e) applies--within 5 days after providing the further service, or as soon as practicable; or

                     (e)  if the further financial service is the provision to the client of a financial product and section 1019B of the Act applies to the acquisition of the product by the client--before the start of the period applicable under subsection 1019B(3) of the Act, or sooner if practicable.



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