ASIC financial adviser exam, Best interests duty, conflicted remuneration and fee consents question: commission to stay outside the conflicted remuneration ban

ASIC examBest interests duty, conflicted remuneration and fee consents

Tahlia Moore, 38, cancels the life risk policy her adviser, Brock Elliott, recommended, 18 months after it was issued; no claim has been made. Brock's licensee received an upfront commission of 60% of the first-year policy cost. For the commission to stay outside the conflicted remuneration ban, the arrangement must require it to repay at least…

A 60% of the upfront commission
B 100% of the upfront commission
C 20% of the upfront commission
D nothing: the policy ran for over a year

Show the answer and explanation

Answer: A. 60% of the upfront commission

The clawback requirements in s963BA(3) of the Corporations Act 2001 (compilation 19 Sep 2026) apply where the policy is cancelled within 2 years of issue, and the repayment must be at least the acceptable repayment set by ASIC. Under s6 of ASIC Corporations (Life Insurance Commissions) Instrument 2017/510, that is 100% of the benefit for a cancellation in the first year and 60% for a cancellation in the second year. At 18 months, Tahlia's cancellation falls in the second year, so the minimum is 60%. The arrangement may require more, but 100% is the minimum only for first-year cancellations. Twenty per cent is the trailing commission cap, not a clawback rate. Clawback runs for two years, so passing the first anniversary does not end it.

Common mistake

The 100% figure is for first-year cancellations; year two drops to 60%.

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