ASIC slammed for giving 'green light' to flout FoFA laws?

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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.

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  • alleycat on 27/02/2014 11:13:13 AM

    Could someone tell Mr Dastyari, an ex-Union hack that the Labour party is no longer in power.
    The country decided very clearly last September that they no longer wanted to be dictated to by self serving group called the Labour party who were responsible for incredible waste, stupid decisions based on warped ideology that have cost many jobs (viz the carbon dioxide tax) and incurred national debt that will take many years, if ever to repay.

    Mr Dastyari, just go away. As the saying goes, "it's better to keep your mouth shut and be thought a fool ".......

  • Mark M on 27/02/2014 10:36:31 AM

    Funny (not) how Labor politicians are now doing all this posturing about FOFA. They were the one's in power when Storm, Trio etc blew up. Why didn't they put the heat on Asic to lift it's game back then? It's as stupid as watching a dog chase it's own tail. Wake up Labor.

  • investor on 27/02/2014 9:44:39 AM

    I think unions, industry funds etc should opperate under Labors laws FOFA laws. Each year the employee gets to decide if he will pay unions fees, the union had to advise what services they provided, they have to put individuals needs first, not their own and should be liable for the outcome of union action. Industry funds the same. Level playing field, thats all we need!

  • GAB on 27/02/2014 9:41:59 AM

    Note "key reforms". No doubt ASIC wasn't too keen in the first place to enforce a ridiculous FDS scheme or opt-in scheme where transparent and negotiated fee arrangements were already in place. They shouldn't be wasting their time and taxpayers money chasing an ISA created dream.

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