On 27 January 2020 the Morrison Government announced that the Treasury would undertake a public consultation on the merits of the current stamping fee exemption in relation to listed investment companies and trusts (“LICs”).
Stamping fees are an upfront one-off commission paid to financial services licensees for their role in capital raisings associated with the initial public offerings of shares.
Following the conclusion of Treasury’s consultation, the Morrison Government will move to extend the ban on conflicted remuneration to LICs. These changes will take effect from 1 July 2020.
Whilst new LICs capital raisings have largely ceased since the inception of COVID-19, it is important that the ban on conflicted remuneration is extended ahead of any resumption of capital raising activity.
Clarifying these arrangements will address any related risk of consumer harm and ensure that stockbrokers, financial advisers and investment managers are clear about the regulatory settings that will apply in this area and investors can continue to invest with confidence in these products.
Extending the ban on conflicted remuneration to LICs will address risks associated with the potential mis-selling of these products to retail consumers, improve competitive neutrality in the funds management industry and provide long term certainty so that this segment of Australia’s capital markets can continue to operate effectively and provide investors with opportunities to diversify their investments.
The treatment of equity and debt securities in trading companies (including hybrids), real estate investment trusts (REITs), and listed infrastructure investments will not be impacted by these changes. Maintaining the existing treatment for these investments is designed to ensure that direct capital raising activities which support the economic activity of companies in the real economy are not impacted by these changes. Persons providing personal advice to a retail client in relation to these products will continue to be legally required to act in that client’s best interests.
The Australian Securities and Investments Commission (ASIC) will actively monitor arrangements in the lead up to and following the introduction of these changes.
