Industry Super Australia (ISA) has issued a statement arguing the government’s FOFA amendments may be “susceptible to challenge in the courts” if they are enacted via regulation rather than through parliament.
The ISA has obtained legal advice from law firm Arnold Bloch Leibler which indicated that if the "more significant amendments" to FOFA are implemented via the Coalition making regulations, they risk being declared "invalid" by the courts.
"A court declaration of invalidity would operate retrospectively … financial advisers who relied on the regulations could be found to have acted unlawfully," according to Arnold Bloch Leibler.
"The regulations would therefore create significant uncertainty…and could well become the subject of protracted litigation between financial advisers and their clients," said the statement.
ISA chief executive David Whiteley said the legal opinion provided by Arnold Bloch Leibler was "highly significant".
“The advice indicates that the Government's chosen path for amending these consumer protection laws would be likely to increase uncertainty for the industry and increase the risk of litigation. This is contrary to the Government's stated objectives for making the changes,” said Mr Whiteley.
“The advice indicates that there is significant doubt regarding the Government's regulation-making power to make changes on ‘opt in’, fee disclosure and best interests,” he said.
“In light of this, industry super funds would suggest that the FOFA laws be given time to settle in and that they be reviewed as a part of the upcoming financial systems inquiry,” said Mr Whiteley.
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