FOFA provides no guarantees of Trio Capital repeat
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.
Recommended for you
The Reserve Bank of Australia (RBA) has lowered rates to a level not seen since mid-2023.
Financial Services Minister Stephen Jones has shared further details on the second tranche of the Delivering Better Financial Outcomes reforms including modernising best interests duty and reforming Statements of Advice.
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
