ASIC still has teeth to police financial planners, despite FoFA delay

The Federal Government’s pausing of its Future of Financial Advice (FoFA)  amendments is adding to regulatory uncertainty for financial planners and industry regulators, according to Richard Batten a partner in law firm Minter Ellison.

“It’s a difficult position for everybody, and it does increase the risk and uncertainty for everyone,” Batten says.

According to a statement  issued by the Australian Securities and Investments Commission (ASIC) to Professional Planner, the regulator is “still within the facilitative period with FoFA”.

“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. We will inform the market if we have to adapt our approach,” it said.

Batten says existing laws should provide sufficient guidance for regulators in the event of a best interest or general advice-related breach by a financial planner amid the current uncertainty.

“ASIC’s no action position wouldn’t protect you from civil liability, and consumers certainly retain their rights, for instance, if they could demonstrate a loss from any breach of the provisions. ASIC can have an important but limited role in terms of its stance,” he says.

“The law is the law, and it has been made. Customers can initiate any complaints through dispute resolution.

“I would think they [the Financial Ombudsman Service] would have some sympathy for the consumer.

“They [FOS] do have a fairness principle and that can work both ways, for the consumer and for the business – that would influence any decision that they made,” he adds.

The chair of the Financial Planning Association of Australia (FPA), Matthew Rowe, also believes the ongoing delays throws up considerable uncertainty for regulators such as ASIC.

“I think the regulator is in a very difficult position, they’re trying to work through what they’re meant to be enforcing and what is still the subject of political uncertainty,” Rowe says.

“I think that, to be fair to ASIC, they are working with a number of stakeholders to make sure there are no unintended consequences of what they do.

“They are being very careful that, where they know there will be changes [to legislation], they ensure they’re giving us time to make those changes ourselves, and I think they’re in a consultation and education process.”

 Note: This article was amended on 26/03/14 to correct some references from ‘regulator’ to ‘Financial Ombudsman Service,’ as commented by Richard Batten at Minter Ellison.