'Quick fix' margin lending rules just the beginning
New margin lending “fitness for purpose” tests will most likely be applied to all financial products, according to a lawyer specialising in financial services.
James Lonie, partner, Henry Davis York, said he expects the Commonwealth Government will in time introduce suitability tests for all financial products, but he questioned the value of the regulatory amendments in a system that lacks a “unifying policy”.
“They’re ratcheting up the responsibility in the planning community, and I don’t know that that’s the right answer,” Lonie said.
He argued that changes to margin lending requirements were attempts at “quick fixes” to recent company failures such as Storm Financial and lacked rigour.
“It may be that planners were at fault but until someone actually investigates what went wrong, any legislative changes are based on guesses. That’s not good enough when it comes to broad-ranging legislative reform.”
According to Lonie, lack of a clear legislative policy is at the heart of the problem. “The regulators don’t like commission, leverage and complex products,” he said.
“But if you deal with these issues separately you get pretty much what we’ve got at the moment: a big thick Corporations Act that is a mixture of economic rationalism and a compendium of quick fixes. What we need is a unifying policy.”
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