Govt slams ISA over FOFA legal doubt

Assistant Treasurer, Senator Arthur Sinodinos has countered claims by Industry Super Australia (ISA) that the Government’s Future of Financial Advice (FOFA) changes will be capable of legal challenge, sayng they will be underwritten by the necessary legislation. 

Legal advice obtained by ISA said that if the more significant amendments were implemented by way of regulation - rather than legislative amendments - they risk being declared “invalid” and “susceptible to challenge in the courts”. 

“A court declaration of invalidity would operate retrospectively ... financial advisers who relied on the regulations could be found to have acted unlawfully,” said law firm Arnold Bloch Leibler. 

“The regulations would therefore create significant uncertainty ... and could well become the subject of protracted litigation between financial advisers and their clients.” 

However, Sinodinos has hit back, saying all regulations would be backed by legislation, which will be introduced into Parliament in the coming weeks. The Government will make regulation to give effect to its FOFA changes “to the extent legally possible”, Sinodinos said, in order to provide certainty to the industry. 

All Commonwealth legislation can be legally challenged and that is ultimately a matter for the courts, he said, adding the Government did not intend to speculate on hypothetical court challenges to the regulations, as posed by the ISA. 

“I encourage all stakeholders to provide input to the consultation process as submissions close this week,” said Senator Sinodinos. 

He also pointed to recent media coverage mentioning the case of Storm Financial, saying no amount of regulation can prevent another collapse. 

“Neither our reforms nor the existing FOFA laws can prevent a possible future financial collapse,” Sinodinos said.