ASIC to continue ignoring FoFA laws

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ASIC will continue to take a relaxed approach to any FoFA breaches relating to specific provisions that the government is planning to repeal, the corporate regulator has confirmed.

A spokesman told Wealth Professional that Australian Securities and Investments Commission (ASIC) is still working within the year-long facilitative period that was initially touted when the FoFA reforms commenced on 1 July 2013.

This is despite the news last Monday that the new face of FoFA, Mathias Cormann, will be freezing the regulation amendments indefinitely.

His announcement came after only a week in the job that he took from Assistant Treasurer Anthony Sinodinos, who stood down due to his involvement in a major corruption case.

The freeze on the FoFa reforms will give Cormann time to respond to criticism on the government’s plan and a parliamentary inquiry into the proposed changes.

But the ASIC spokesman said that as the facilitative period is still active, for now the pause won’t change how the commission deals with breaches specific to provisions that potentially will be amended.

“That gives us flexibility to consider the Government's recent announcement - we are currently in discussions with the Government - and to adapt any of our current messages to take into account this recent decision,” he said. “We will inform the market if we have to adapt our approach.”

At a February appearance in front of the Senate Economic Legislation Committee - which the FoFA legislation has subsequently been referred to for further inquiry and report - ASIC was drawn over the coals about its lack of enforcement.

At the time Senator Sam Dastyari questioned representatives of 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.

“Is an intention enough for you to make decisions on what you do or don’t enforce?” Dastyari 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.”

The now stepped-down Senator Sinodinos fought back, stating, “all ASIC is trying to do is provide some certainty in the marketplace”.

As well as dealing with various FoFA issues, the corporate regulator is facing a senate inquiry into its performance, due to be reported on 30 May.

In a submission to the inquiry ASIC has already conceded that its penalties have not been comprehensively reviewed for more than a decade.

A report it released a week ago revealed that while ASIC’s maximum criminal penalties – jail and fines – are broadly consistent with those available in other countries, there are significantly higher prison terms in the US, and higher fines in other overseas countries for certain offences.

There is also a broader and tougher range of civil and administrative penalties in other countries, including the ability to remove financial benefit from wrongdoing.

Today ASIC will appear before the Parliamentary Joint Committee on Corporations and Financial Services  in order to provide updates on its activities and answer questions.


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