The Australian Securities and Investments Commission’s previous commitment that it will adopt a ‘non-enforcement’ position for those elements of the Future of Financial Advice (FoFA) legislation that the Government intends to amend may not be the safety net advisers have hoped for, the Financial Planning Association (FPA) has warned.
Speaking at the Sydney leg of the FPA’s National Roadshow series, FPA CEO, Mark Rantall, said ASIC had received ‘a lot of heat’ for its non-enforcement position from the Senate Economics References Committee (SERC), which is currently conducting an inquiry into the regulator’s performance and handling of the Commonwealth Financial Planning scandal.
Following the release of the Government’s proposed FoFA amendments in December 2013, ASIC issued a statement saying it would not take enforcement action against financial service practitioners in relation to the specific FoFA provisions that the Government planned to repeal (see: ASIC to Take Non-Enforcement Approach to FoFA Changes).
This approach has been challenged by the SERC, who have questioned the wisdom of a ‘blanket approach’ to regulation. In response, ASIC said the position formed part of their 12 month facilitative approach to the enforcement of the FoFA regime.
“Any of you who are relying on what we’ve deemed a ‘no action’ position, albeit delivered via a press release, and I know there are many licensees that are relying on that, that’s okay. But ASIC has been challenged on it,” said Mr Rantall.
“Their response has been that this forms part of their facilitative approach for the first 12 months of FoFA, so my sense is that they won’t take action against this in the first 12 months. But guess when that runs out? 30 June.”
Mr Rantall said the FPA expects ASIC will need to issue a statement clarifying its position prior to 30 June 2014, because it is unlikely that the legislation will pass Parliament within the next month.
This Government is really going to struggle to get any legislation through the Parliament
“This Government is really going to struggle to get any legislation through the Parliament. They do not have the majority in the Senate. They clearly have a majority in the Lower House, so in the House of Representatives, all the legislation will be passed through fairly easily. But when it hits the Senate, the brakes go on. The brakes go on for this reason: you need 39 votes to get legislation through the Senate, the Coalition has 33.”
The FoFA amendments legislation is currently the subject of its own Senate Committee inquiry, with a report due on 16 June. Mr Rantall said it was likely that Senator Mathias Cormann, in his capacity as acting Assistant Treasurer, would release a statement on the reforms ‘very soon after, probably no later than 18 June’.
