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."