In a submission to the Senate inquiry into ASIC, Stephen Jones MP, federal member for Throsby on the NSW South Coast, has defended the FOFA legislation in its current form, arguing the laws may have assisted victims of the Trio Collapse – many of whom are his constituents.
“As you would be aware, the Labor government introduced tough new laws known as the ‘Future of Financial Advice’ that banned kick-backs for financial advisers and imposed a new duty for financial advisers to put clients’ interests first,” Mr Jones wrote.
“I believe that if these laws had been put in place before 2007, many of the worst examples of the losses in Trio may never have occurred. Given the terrible experience of Illawarra constituents, I am deeply concerned at reports that the Abbott Government now plans to axe these reforms.”
Mr Jones also argued that more responsibility for investor losses related to Trio should be taken by financial advisers, singling out former Wollongong-based financial adviser Ross Tarrant.
“As a financial adviser, Mr Ross Tarrant would have known that there would be no compensation available to these SMSF investors under part 23,” Mr Jones wrote. “That financial adviser received significant commissions for encouraging these investors to do this.”
However, former Trio investor and secretary of the Victims of Financial Fraud (VOFF) organisation John Telford recently told ifa that Mr Tarrant’s former clients do not blame him for the losses sustained.
“Somehow Ross Tarrant has become the scapegoat and the focus became upon him,” Mr Telford said, claiming the blame should lie with the relevant regulatory authorities.
Mr Telford has also issued a formal submission to the Senate inquiry, in which he argues that “weaknesses in the financial system” led to the investor losses in Trio and that former Labor financial services minister Bill Shorten had made “disingenuous, defamatory and misleading statements and comments” about Trio victims.
What a load of dross . there has been serious corporate malfeasance where Trio is concerned . Generally the adviser / licencee have to idea that the books are being cooked . No amount of FoFA will help advisers or the investing public when crooks want to steal money . If anything this is a total failure of auditors and the relevant statutory authority . Labor shoudl give it a spell and accept that the vast majority of advisers act in their clients best interests at all times.
Labor MPs were great at blaming everyone else, for all failures. As a financial adviser I think FOFA is a very positive step for financial services in its push for becoming a profession. There were areas of it however that effectively doubled up. For example, if there are no commisions or trailing commisions, why require opt in (a client can always opt out by making a phone call to either the adviser or the product provider). Trio was a case of fraud. They were licensed through ASIC, highly rated by the research houses, had NAB as custodian, and were audited every year. In the face of all that positive feedback to the adivser, why is it that they almost solely cop the blame? Unless gatekeeper failures are addressed FOFA won’t stop the next Trio. There were dodgy practices with Trio (including excess payments to some practices), but accepting a standard commision was not one of them (disclosure – we don’t accept commisions). Blaming the most visible target (advisers) doesn’t help.
Individuals who enter into self managed superannuation arrangements do so because they wish to self manage and they feel that they have more control over their investments. As trustees they ultimately hold responsibility for their investments. How many of these investors have an investment strategy as part of their trust deed? How many of them have left their binding nomination documentation incomplete or blank? How many have actually read their trust deed?
The reforms that the Labor Party had introduced would not have protected these investors. Maybe Labor should have enforced financial literacy upon them because I can assure you that there are many who clearly do not understand the concept of self managed superannuation funds or risk management.
The next flood of tears could involve negative gearing within superannuation. The jury is out.