ASIC was drawn over the coals about its lack of enforcement over the FoFA legislation during its appearance to the Senate Economics Legislation Committee yesterday.
Senator Sam Dastyari questioned representatives of the Australian Securities and Investments Commission (ASIC) about why it has chosen not to enforce some FoFA regulations.
He used a document issued by ASIC on 20 December, 2013, which stated that it would not take enforcement action in relation to the specific FOFA provisions that the Government is planning to repeal.
Particularly, it would not take action for breaches of current section 962S of the Corporations Act 2001
, which requires fee disclosure statements to be provided to retail clients with ongoing fee arrangements entered into before 1 July 2013.
But Dastyari said ignoring a law that was passed in parliament based on an intention to change it is not good enough.
“Is an intention enough for you to make decisions on what you do or don’t enforce?” he asked. “There’s a big difference between what you said today, and what you’re issuing as a statement. This is a green light [for advisers] to be able to do what [they] like and ignore the FoFA changes,” he said.
Assistant Treasurer Arthur Sinodinos fought back, stating, “all ASIC is trying to do is provide some certainty in the marketplace”.
During the appearance ASIC insisted that any major breaches would be enforced, however, while there is confusion due to the exposure draft on the FoFA, it would be taking more of a facilitative approach.
Members argued that it acted in exactly the same way after law changes under the last government, when it also didn’t strictly enforce the law for the first 12 months.
When Dastyari asked whether ASIC would go back to enforcing proposed changes if they weren’t to pass into law, deputy chair Peter Kell replied he didn’t want to speculate.
“Our focus is to help the industry get these reforms in place. That’s what we’re trying to do,” he said. “When you have a complex package of reforms, this is not an unusual approach. “
Kell said that while it was too early to issue a definitive statement about how well the FoFA model is functioning, early analysis is positive.
“[It shows] that most of the industry have adapted to key reforms, and have a stronger business as they create more customer focused business models. These were the sorts of changes we were hoping to see,” he said.