The Association of Financial Advisers (AFA) wants the Life Insurance Framework regulations to define who is responsible for clawback provisions.

In a submission to Treasury it says the regulations should clearly define where the clawback obligation rests if a commission is transferred to another adviser within the two-year period.

“Current practice allows for adviser remuneration to be transferred to another fee recipient where an adviser moves to a different licensee, sells their client book or is no longer servicing the client,” the submission says.

“Clarifying within the regulations where ‘an arrangement’ subsequently changes will provide clarity to fee recipients who are presented with a situation that will result in a transfer of ongoing commission.”

The AFA says similar regulations were inserted into the Corporations Regulations during the Future of Financial Advice (FOFA) changes for investment advice commissions.

It wants the regulations to specify that if “an arrangement’ is struck before January 1 2018, the subsequent payment of ongoing commissions is treated as a new agreement.

This would include the ongoing benefit being assigned to another adviser or licensee, the commission being redirected by the insurer to another licensee, or an adviser moving from being an employee of a practice to being an authorised representative.

The AFA says these situations were covered under the FOFA remuneration framework.

It says Treasury should apply consistent treatment of life commission grandfathering.

“The AFA considers this necessary to avoid future unnecessary further regulatory amendments to cover unintended consequences that will likely apply to life insurance benefits, as they did to the investment benefits under FOFA,” the submission says.

“This is necessary to ensure small life insurance businesses can continue to be competitive, policyholders will continue to be appropriately advised and serviced, and advisers will not be unfairly restrained from moving licensees.”