A senior financial services lawyer has confirmed that there is little in the Government's Future of Financial Advice (FOFA) changes to prevent the Trio Capital, Storm Financial or Westpoint disasters happening again.
Townsends Business Lawyers principal Peter Townsend said that while the full report of the Parliamentary Joint Committee into the Trio collapse was welcome, he did not believe either the regulators or the Government fully understood the potential for another managed investment scheme offering in the future.
"There has been no real change to the rules making early detection and pre-emptive enforcement easier against flawed schemes of fraudulent management," he said.
Townsend said that while awareness and action after the fact are swifter today than in earlier times, he has seen little evidence that early enforcement is materially tighter or more effective.
"Ripoll's reviews of Storm and advice processes have built better investor protection around making class actions easier to mount after the event has happened [and are] laudable, but truly having legislation that would stop it happening again is not yet a reality," Townsend said.
Pointing to the circumstances around Storm Financial, he said that it was worth remembering that Storm clients had full documentation outlining all the risks associated with growth assets/gearing but this did not protect them.
"Please don't think that 'fee for service' will automatically end the rorts offered by some commission-based schemes of the past – unreasonably large fees for the service provided are still possible," Townsend said.
