Industry Super Australia (ISA) has reiterated legal advice from Arnold Bloch Leibler that the government’s proposed amendments to FOFA (specifically, the removal of the final ‘catch all’ provision in the best interests duty) are inconsistent with the nature of the best interests duty.
ISA first aired the legal claims in February, prompting Assistant Treasurer Arthur Sinodinos to publicly downplay them, stating that any legal challenge to the amended law would be a “matter for the courts”.
In yesterday’s statement, ISA also said the proposed amendments would “significantly reduce the protection that the duty affords to clients of financial advisers”.
“The draft legislation makes two sets of changes to the best interests obligation – removing the so-called “catch all” and allowing advisers and clients to “agree” on the scope of advice to be provided,” said the ISA statement.
According to Arnold Bloch Leibler, the removal of the catch-all provision would “mean that financial advisers could comply with the best interests duty without having to exercise their own judgment, in the client’s particular circumstances, to consider whether any further steps are warranted.”
“This would likely reduce the overall quality of financial advice given in Australia, with advisers focused on carrying out the remaining steps in the safe harbour as efficiently as possible – in other words, going through the motions and reducing the best interests duty to a mechanical checklist,” said Arnold Bloch Leibler.
“The proposed amendments are therefore inconsistent with a best interests duty,” concluded the law firm.
ISA deputy chief executive Robbie Campo said that if the proposed changes are made law, “it will be possible to satisfy the best interests requirement without having to consider or act in the client’s best interests because the “catch all” was the only part of the test that referred to acting in a client’s best interests”.
Halsey Legal Service principal Mark Halsey criticised similar claims about the ‘repeal’ of FOFA by ISA chair Peter Collins on 20 February.
