The degree to which financial advice organisations, particularly those associated with self-managed superannuation funds (SMSFs) have sought to avoid capture by the Government’s proposed new Design and Distribution Obligations (DDO) regime has been laid bare by submissions to Federal Treasury.
The submissions, filed in October last year but only recently made public, reveal strong arguments that SMSFs should be specifically exempted from the DDO regime to be overseen by the Australian Securities and Investments Commission (ASIC).
Among those most strongly advocating for the exemption were both the SMSF Association (SMSFA) and the Association of Financial Advisers (AFA), with the SMSFA calling for the DDO legislation to contain a specific exemption for self-managed funds.
The association said the specific exemption was needed because while it believed some interpretations of Corporations Law could see SMSFs and their trustees or firms advising SMSFs exempted on the basis of reasonable ground, this could not be relied upon if ASIC adopted a different view.
“Given this uncertainty, we believe it is appropriate for the regulations to specifically exclude SMSFs as they have other financial products,” the SMSF Association said. “This will provide clarity to the industry but also ensure that the intent of the legislation is not circumvented.”
The AFA was much more clear-cut in simply stating that SMSFs should not be classified as a financial product because they were different to such products in many ways.
“We believe that there are grounds for treating SMSFs differently, including the fact that they are more of a service than a product and are typically used to house other products that will be caught under the Design and Distributions Obligations legislation,” the AFA said.
“In addition, the product provider is technically the trustees of the SMSF, who are also the members of the fund. Thus, the benefit of this legislation is less apparent in the case of SMSFs.”
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