The financial services industry’s preparations for a move to the Financial Services Reform Act (FSRA) regime could be thrown into disarray after crucial new regulations were blocked in the Senate.
The Labor Party, with the support of the Democrats, successfully passed a motion to disallow the regulations last night, arguing they did not ensure the meaningful disclosure of fees and charges for consumers.
The regulations spell out how managed fund providers disclose fees and charges under the FSRA regime, including the calculation of the Ongoing Management Charge (OMC), a measure of the total impact of fees on superannuation products.
But the shadow minister for financial services, Labor Senator Stephen Conroy, says the OMC was a poor measure, which did not include entry and exit fees and did not demonstrate the full impact of fees on a superannuation member’s benefits.
“It is clear that the OMC is flawed and must be improved,” Conroy says.
In a speech to Parliament last night, Conroy also said the different disclosure requirements for superannuation as opposed to other managed investment products under the regulations was inconsistent with the aims of the FSRA.
“Everyone must understand that the purpose of the [FSRA] was to consistently and comprehensively protect consumers irrespective of the type of financial product or advise,” Conroy says.
But the parliamentary secretary to the treasurer, Liberal Senator Ian Campbell, says Labor’s move has created a regulatory vaccuum, leaving the financial services industry with no model for disclosure under the FSRA regime.
“Industry and consumers deserve legislative certainty to move effectively to the new regime. Labor has recklessly created a regulatory vacuum,” he says.
Conroy said last night the Labor party was prepared to negotiate an outcome with the Government over the impasse.
