Financial planners are unlikely to face legal action on advice covered by the proposed Future of Financial Advice (FOFA) amendments, with courts recognising the transitionary and uncertain nature of the circumstances in which the advice was given, according to Baker & McKenzie financial services partner Astrid Raetze.
Raetze said that while all seven safe harbour steps regarding the best interests duty rules in FOFA were currently enforced, any action against an adviser in the future for not following the seventh would be an ‘uphill battle'.
"If a consumer made a claim in the future against an adviser stating that advice provided in early 2014 was not covered by the catch-all feature, knowing that it was to be repealed, that action would be an uphill battle," Raetze said.
"If the argument was that an adviser failed to meet the seventh criteria but had met the preceding six and the client needed recompense, the courts would likely recognise the uncertainty surrounding that provision and the likelihood it was to be repealed."
Raetze said it would be highly unlikely that any cases would be brought relating to Fee Disclosure Statements, with planners having either complied under the law or set to do so during the transition period for FOFA.
"I would be surprised if any action was run on these matters towards planners or even towards ASIC for not enforcing these parts of the FOFA laws."
Raetze's comments echo those of the Australian Securities and Investments Commission (ASIC) in its statement of 20 December 2013 and at the recent public hearings of the Senate inquiry into the performance of ASIC.
In both instances ASIC stated it would take a facilitative approach to the transition into the FOFA regime, including those areas that may be amended by the Federal Government.
This position has been criticised by a member of the Senate inquiry, Senator Sam Dastyari, who stated that ASIC should make a distinction between law that has been passed by the Federal Parliament and any proposals to change that law.
