Staying ahead of a 1 July, 2014 deadline on grandfathering provisions is a key reason why the government has opted for a regulatory approach to the Future of Financial Advice (FoFA) reforms, says Jon Ireland, partner at law firm Henry Davis York.
Ireland explains there are various reasons why the government has moved so swiftly in responding to the Senate Economics Legislation Committee’s report into the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014. This report was handed down late in the evening on Monday 16 June, with the government responding by early in the morning of Friday 20 June.
One of these is the transitioning of grandfathering provisions, with 1 July a cut-off date, “particularly in payments from non-platform operators”.
The start of the new financial year is also an important cut-off date for various other financial sector and general business provisions, which Ireland suggests also makes 1 July an advantageous date for the new regulations to take effect.
All about timing
According to Ireland: “It’s timing. The move to put it through by regulation means it can be implemented for 1 July. It’s an executive approval process rather than having to go through both houses.”
Referring to some of the legal technicalities of the process he says there needs to be provisions in the Corporations Act to empower changes in that way.
“It’s been a practice for the Corporations Act to be amended by regulation, particularly from Fin services, before, it’s certainly not unprecedented. However, I think it’s clearly a timing objective, to have the changes introduced by regulation rather than waiting for…the amending passages of the act to go through both houses [of parliament].”
“There’s always going to be a trade-off between making a decision in the law… and fact gathering based on other industry and regulatory factors that are in play,” says Ireland.
Opposing perspective
Asked why he believes the decision had been made to bring the changes to FoFA through by this means, shadow minister for financial services and superannuation, Bernie Ripoll, says: “We’re not accepting of this view of a ministerial edict by trying to ram it through the senate is the right way…they’re afraid of a debate because they know they’re wrong.”
What happens now?
“The devil will be in the detail. My main reaction was around the additional explicit prohibition on particular general advice payments – the ring fencing and the initiative to make sure there won’t be any payments in relation to general advice,” Ireland says.
“My comment is that clearly this is piecemeal legislation that’s been developed, and a future set of provisions addressing these would need to be drafted very carefully.
“The framework is getting so dense…it needs to be worked through to make sure it doesn’t introduce more complexity.”
