The government moved a motion to partially rescind Labor’s 19 November disallowance motion of the Coalition’s FOFA amendments on Thursday, 27 November.
The ‘reallowance’ motion, as Mr Batten refers to it, permitted a number of regulations to be ‘re-made’.
These included the grandfathering of revenue to allow financial planners to switch licensees; a delay to the start of the application of the ban on conflicted remuneration to employees to 1 July 2015; a stamping fee exemption; and allowing an accountant’s certificate to last for two years.
But one glaring omission from the reallowance motion is the adjustments in the retail/wholesale client definition, Mr Batten said.
Wholesale clients must have over $10 million and are exempt from retail financial planning regulations – and hence the FOFA rules.
Under the Coalition’s FOFA amendments, assets of controlled companies and trusts could be included in the $10 million wholesale ‘test’.
But under the changed regulations the client in question must directly hold assets of over $10 million.
The result, said Mr Batten, is that clients will be treated as retail for some purposes (ie. FOFA) and wholesale for others (ie. disclosure).
“This is a disaster. You really wonder what people are thinking here,” Mr Batten said.
“You can’t realistically have two different definitions for statements of advice, the best interests duty or other obligations,” he said.
“It would potentially force people to treat clients as retail clients even where they didn’t need to be for disclosure purposes,” Mr Batten said.
If an individual controls companies and trusts that are valued in excess of $10 million it is “absurd” to treat them as a retail client, he added.
“The fact that a client doesn’t personally have very much money in their own name doesn’t mean they shouldn’t be treated as a wholesale client,” Mr Batten said.
The discrepancy between wholesale and retail client definitions is also at odds with the government’s push to reduce red tape, he added.
