Not speculating on hypothetical court challenges

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Assistant Treasurer Arthur Sinodinos has shot down Industry Super Australia’s discourse yesterday about the litigation risks of FOFA regulation.

Sinodinos released a statement setting “the facts straight” about FOFA and responding to the legal advice obtained by ISA, which suggested any amendments made through regulation rather than legislation could be deemed invalid by the courts. 

ISA’s advice, from Melbourne law firm Arnold Bloch Leibler, stated “a court declaration of invalidity would operate retrospectively… financial advisers who relied on the regulations could be found to have acted unlawfully. The regulations would therefore create significant uncertainty…and could well become the subject of protracted litigation between financial advisers and their clients”.

In particular, regulations made on changes to opt-in, fee disclosure and best interests would be at risk, they said.

However, Sinodinos replied: "In relation to the legal advice obtained by Industry Super Australia, all Commonwealth legislation can be legally challenged and that is ultimately a matter for the courts.

"The Government does not intend to speculate on hypothetical court challenges to the regulations."

The Government will make changes to FOFA under regulations – to the extent legally possible – to provide certainty to the industry before legislation is passed by Parliament, the assistant treasurer said. 

"It has always been the case that the regulations will be backed by legislation. This legislation will be introduced into Parliament in the coming weeks,” he said.

The legal advice ISA obtained said absence of provisions implementing the amendments in the draft regulations show the Government is “uncertain” about how such provisions will be drafted.

“These amendments represent policy choices by the government and significant departures from the current legislation… The Government may only make regulations if it is empowered to do so by legislation,” the legal opinion said.

But as the AFR's Tony Boyd commented tongue-in-cheek this morning: "The law firm involved may have tapped into a gold mine. Over the years, the Corporations Act has been amended hundreds of times through the use of regulations. It could make a killing if it republishes the same advice for the next 100 amendments."
 
  • James Smith on 18/02/2014 9:46:30 AM

    You have got to give it to the ISN. They have been incredibly successful in influencing the media ( and now a respected legal firm ) to act as their marketing engine.
    Sadly, it reflects poorly on both the media and this legal firm that they are so easily manipulated.

  • Mark Thompson on 18/02/2014 9:59:47 AM

    It seems richly ironic that the ISN are so concerned with Best Interest, yet they don't demonstrate it themselves. Do any of their advisers recommend that prospective members research 3 other super funds and weigh up their merits before becoming a member of their own fund? Er derrr!

  • alleycat on 18/02/2014 10:00:51 AM

    Good on you Mr Sinodinos, put these Labour hacks and their hangers-on, back where their on self serving interests belong.
    The financial planning industry has had enough of over-regulation and changes since FSR in 2000.
    We already disclose on review our ongoing fees, so FDS are superfluous. Clients have the right to opt out any time, so opt-in is superfluous. Do industry funds have to adhere to the same opt-in provisions, if not, why not? They collect fees and commissions but are not declared to members, otherwise where does the money come from to pay the likes of Mr Whitely and the ISA expensive television advertising ?
    Conflicted ?, you bet by any definition of the word.
    The sooner Tony Abbott has his royal commission into the Unions/Labour Party and their mates in the ISA the better.
    Perhaps self interest by these people are greater than those displayed by the Likes of Storm Financial.

  • Bruce Gingell CFP (retired) on 18/02/2014 10:55:51 AM

    Surely there is a question-mark as to whether all this is the best use of the funding provided to ISA. If member funds are in turn contributing to this cause from superannuants fees that is bad enough, but of course there are other vested interests pushing for a bigger tussle with political idealism at stake. It is just that financial advisers and their clients are meat in the sandwich. The majority of professionals in the industry just want a fair business environment and to get on with helping Australians better themselves financially! ISA, STOP the scare-mongering. It does none of those people who need real help any good (including union members)!

  • Bob on 18/02/2014 12:22:54 PM

    Pity none of this is picked up by the main stream media, think there may be vested interests?

  • Mark Thompson on 18/02/2014 1:52:48 PM

    What the ISA needs now is another riveting ad from Bernie Fraser, doing his Sandman impersonation. Hey, why don't we get Sandman to make a riveting ad impersonating Bernie Fraser.

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