The FPA has warned against industry members treating ASIC’s principles-based legislation as law, giving the AMP enforceable undertaking (EU) as an example.
Speaking at ASIC’s annual conference yesterday, FPA chair Corinna Dieters said the association was strongly supportive of ASIC’s principles-based rather than rules-based approach to regulation, but said financial planners were having difficulty implementing it.
“The FPA certainly believes, for the financial planning sector, that principles-based regulation is the approach which will deliver the best results for consumers, business and the Australian economy as a whole,” Dieters said.
“Of concern is when the regulator and the regulated treat the regulator’s implementation guidance of principles-based legislation as law.
“An example…is the widespread concern generated as a result of ASIC’s recent enforceable undertaking, resulting in further review of business practices even though there was no change to the act.”
ASIC has reprimanded AMP Financial Planning over problems with disclosure relating to superannuation-switching advice given by its financial planners. Around 35,000 customers are being offered a review, and in cases will have money refunded.
Dieters said the industry sees an EU as establishing a precedent because it interprets the law, but said ASIC disagrees.
“ASIC [says] each EU must be considered on the particular circumstances of the case,” she said.
Dieters said the problem is exacerbated by a lack of meaningful co-operation between the regulator and business to develop the guidance.
“This, the FPA believes, is at the heart of the prescription which we are now working to roll back,” she said.
“This has been compounded by the compliance requirements which businesses impose upon themselves to guard against all possibility of legal action – and one can hardly excuse business for doing so when their reputations are at risk.”
The FPA is keen to work with stakeholders to reach a proper balance between law and guidance, Dieters said.
