Senior Treasury officials have signaled they expect the Minister for Financial Services, Bill Shorten, to outline the rules around Future of Financial Advice (FOFA) grandfathering within the next few weeks and have acknowledged that time is running short.
The Treasury expectation was revealed during a Senate Estimates Committee hearing during which the Shadow Assistant Treasurer, Senator Mathias Cormann, managed to gain confirmation that the revised regulations around grandfathering had not been finalised.
The Treasury officials also indicated that they had disagreed with the approach to grandfathering originally outlined in the legislation, saying that, usually, grandfathering arrangements applied to existing arrangements but that, currently, "with the way the grandfathering arrangements were drafted, it would also enable existing arrangements for new clients and new arrangements to come into place under the grandfathering".
The executive director of the Treasury Markets Group, Jim Murphy, claimed a lot of people believed this approach was "questionable", so it was being reviewed by the minister.
Cormann questioned the time being taken to finalise the legislation in circumstances where financial services companies would be expected to have it implemented within four months.
However Murphy said: "In terms of that grandfathering arrangement between dealers and clients, there are already regulations there. It is just a case of whether you want to fine tune those".
Asked what had caused the delay, Murphy said: "The Government's proposal, in Treasury's view — and it is not the Government's view — was liberal permissive and went too far in terms of its grandfathering. A number in the marketplace said it is too liberal. Some did not. That has caused the Government to rethink this proposal and to consider whether it is too liberal".
"The grandfathering usually enables existing arrangements to be grandfathered. This grandfathering would have enabled new clients and new transactions to be also included in that grandfathering, and some people say that is going too far. That is not just Treasury. Some of the major finance houses and the super funds are saying it is."
