Consumers may be left without the protection of the law as a result of the Government’s Future of Financial Advice (FoFA) Commencement Date
amendment, according to the Association of Financial Advisers (AFA).
“The AFA has had legal advice which suggests that on a literal interpretation of the law, there will be a period where neither the current Know your Client obligation under Sections 945A and 945B of the Corporations Act 2011, nor the Best Interests obligations under FoFA will apply to a licensee or advisers when giving personal advice to retail clients,” said AFA CEO Richard Klipin.
Mr Klipin said the AFA’s legal advice suggests that while Section 945A will be repealed by the FoFA legislation, coming into effect from 1 July 2012, the Best Interests obligation only comes into effect from the point when a licensee opts-in or 1 July 2013, whichever comes first (Section 1527).
“Given this uncertainty, we are genuinely concerned that consumers may be left unprotected for up to a year and are seeking urgent Government intervention to resolve the ssue,” Mr Klipin said.
Given the state of the legislation, regulations and lack of regulatory guides, Mr Klipin said the AFA believes that all of FoFA should have had a start date of 1 July 2013.
“A start date of 1 July 2013 would have been straightforward and easy to implement,” he said. “The complex and confusing commencement date amendment has opened up a new set of problems that could have significant negative consequences for consumers.”
Mr Klipin said the AFA wants to ensure that consumers are not disadvantaged by the legislation. “This complication, of what is already complex and confusing legislation, has the potential to put consumers unnecessarily at risk,” he said.
“It is also completely at odds with the Government’s stated intention of FoFA.”