The ISA released a statement early yesterday that referred to legal advice obtained from law firm Arnold Bloch Leibler which indicated that if the "more significant amendments" to FOFA are implemented via the Coalition making regulations, they risk being declared "invalid" by the courts.
"A court declaration of invalidity would operate retrospectively … financial advisers who relied on the regulations could be found to have acted unlawfully," according to Arnold Bloch Leibler.
"The regulations would therefore create significant uncertainty…and could well become the subject of protracted litigation between financial advisers and their clients," said the ISA statement.
After the the ISA comments were picked up by the mainstream press, Mr Sinodinos moved to "set the facts straight about the Government's FOFA reform package" in a statement released yesterday afternoon.
"It has always been the case that the regulations will be backed by legislation. This legislation will be introduced into Parliament in the coming weeks," he said.
"In relation to the legal advice obtained by Industry Super Australia, all Commonwealth legislation can be legally challenged and that is ultimately a matter for the courts," said Mr Sinodinos.
The Senator refuse to comment on "hypothetical court challenges" to the regulations – but he did address media coverage that focused on the collapse of Storm Financial.
"Let's be clear: no amount of regulation can prevent another financial collapse as you can never regulate away all risk," said Mr Sinodinos.
Neither the Coalition's amendments nor the existing FOFA laws can prevent a possible future financial collapse, he said.
"The Abbott Government will continue to listen carefully to all views put forward and will consider the drafting of regulations and legislation if it does not reflect our policy intent," said Mr Sinodinos.
