Speaking to InvestorDaily, Henry Davis York partner Jon Ireland pointed to the language used in the explanatory memorandum for the government’s proposed changes to FOFA.
Specifically, he highlighted the “binary” language used in relation to scaled and holistic (ie, comprehensive) advice.
The explanatory memorandum states: “Scaled advice is advice about a specific area of a client’s needs, such as insurance or superannuation. This contrasts ‘holistic advice’ which is another advice model offered by providers.”
“It’s this or that,” said Mr Ireland. “There’s no middle ground [in the explanatory statement].”
“My understanding is that there’s a middle ground that needs to be addressed in terms of the Australians who need advice,” he said.
The language in the government’s drafting documents is in stark contrast with ASIC’s guidance on the issue, said Mr Ireland.
ASIC Regulatory Guide 244: Giving information, general advice and scaled advice states that “all advice is scaled to some extent – advice is either less or more comprehensive in scope along a continuous spectrum (ie, there are not two categories of advice: ‘scaled’ and ‘comprehensive’ advice)”.
“It can’t be binary and a spectrum,” said Mr Ireland.
“The law has to develop with both a recognition of the commercial realities and the advice needs of the nation. You can’t be drafting this stuff in a vacuum,” he said.
The commentary around the law (ie, explanatory memorandums) can be “quite important in understanding how to apply the law”, he added.
