Opposition questions “special deal” on opt in

The Coalition has slammed what it called a “last minute” amendment to the Future of Financial Advice (FoFA) legislation currently before the House of Representatives.

The amendments to FoFA (see below) tabled in Parliament today (Thursday 22 March) do not remove the opt-in component of the reforms but leave the controversial requirement at the discretion of the regulator in a move that has created more confusion than clarity.

“Bill Shorten’s last minute amendment negotiated in a secret and exclusive late-night special deal does not solve any of the current problems with the Future of Financial Advice legislation,” said Shadow Minister for Financial Services and Superannuation Mathias Cormann.

“The Shorten Opt-In Amendment gives significant new responsibilities to ASIC by giving them the power to make the decision on who should be forced into Opt-In arrangements and who should not be.”

At this stage it is unclear how ASIC would exercise these new powers.

Cormann said the Coalition remains committed to the complete removal of opt in.

“It should be removed entirely because it imposes unnecessary additional costs and red tape for both business and consumers with questionable additional consumer protection benefits,” he said.

“Last-minute deals negotiated behind closed doors with selected industry participants are not the way to develop good public policy or legislation.

“This is just another special deal by Bill Shorten without proper consideration of the public interest and it ignores the views of the vast majority of financial services professionals in the industry.”

John Brogden, CEO of the Financial Services Council, said the Amendment failed to provide certainty for consumers and financial advisers and therefore the Council will not support it.

“Our concern is that the legislation leaves it to ASIC to administer opt in without any certainty as to what they require to provide an exemption and what the professional standards will be,” Brogden said.

“Under a last minute deal between the Financial Planning Association and Industry Super Network, the Government has dropped the requirement for opt in but will not give any certainty to consumers and advisers on the operation of the best interest duty and scaleable advice.”

The watering down of opt in would also appear to put greater emphasis on industry associations and particularly the 18 per cent of financial planners who recently told Investment Trends that they do not belong to a professional association.

The Opt-in Amendment:

(1) ASIC may exempt a person, or a class of persons, from section 962K (the opt-in requirement), if ASIC is satisfied that the person is, or persons of that class are, bound by a code of conduct approved by ASIC for the purposes of this section.

(2) A code of conduct is approved by ASIC for the purposes of this section if:

(a) the code of conduct is approved by ASIC under section 1101A; and

(b) ASIC is satisfied that the code of conduct obviates the need for persons bound by the code to be bound by the opt-in requirement; and

(c) ASIC is satisfied of any other matters prescribed by the regulations.

(3) The exemption must be in writing and ASIC must publish notice of it in the Gazette.

Note: Under s1101A, ASIC may “on application, approve codes of conduct that relate to any aspect of the activities” of financial services licensees, authorised representatives of financial services licensees or issuers of financial products.