Legal requirements advisers need to know

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FOFA amendments are likely to made law by the end of the year, leaving those in the advice profession somewhat in limbo. Fiona Halsey, director of Halsey Legal Services, explains the legal position for advisers before the amendments take effect.

“The Government's published approach is that time sensitive FOFA amendments will be dealt with through regulations, to the extent allowed under the relevant regulation making powers, and then later locked into legislation,” says Halsey.

“Unfortunately, this does mean that there may be a gap between the time of the announcements of the proposed changes and a change in the legislation.”

The Government has predicted changes to FOFA will be decided on by the end of March, and a Bill will be introduced into Parliament in the autumn sitting period to be passed into law during the winter sitting period.

On 20 December last year, ASIC stated it will be taking a “facilitative approach” in respect of the proposed amendments to the FOFA legislation, Halsey said.

“Importantly, ASIC has confirmed that it will not take enforcement action for breaches of the existing FOFA laws, to the extent that the breaches are in line with the changes proposed by the Government. 

“For example, ASIC will not take action against licensees who do not provide a fee disclosure statement to relevant clients who entered into an ongoing fee arrangement before 1 July 2013.  

“However, ASIC's published stance does not remove a client's right to take private action in court (or through a dispute resolution scheme) against the adviser where the existing – yet to be repealed – legislation and regulations are breached and in the event that the client feels that they are disadvantaged.”

Licensees and representatives will need to be aware of their current obligations under the current law and consider their conduct carefully in light of the issues outlined above – particularly any demands made by clients, Halsey warns.