The regulator’s new definition of independence under the Corporations Act could be challenged by affected advisers in the courts, says a barrister specialising in financial services.
Last week, ASIC issued a clarification of the law, announcing its intention to crack down on perceived misuse of the terms ‘non-aligned’ and ‘independently-owned’, giving the IFA sector six months to comply with the new definition.
A letter from South Australian barrister Arwed Turon of Turon Legal to AIOFP executive director Peter Johnston, seen by ifa, explains that the non-aligned financial advice community has two options in responding to ASIC’s clarification, including a possible legal challenge.
“It must be remembered that the approach now taken by ASIC, based on external legal advice, is not law: it is an interpretation adopted by it of the provisions of s923A,” Mr Turon wrote.
“Therefore, that interpretation can be challenged in the Federal Court, or the Supreme Court of any competent jurisdiction, given that it can be said to be a matter of conjecture.”
However, such a challenge would need to be brought by a financial adviser or business actually affected by the law, rather than a lobby group like the AIOFP, the lawyer advised.
The second option would be to lobby the relevant federal authorities for amendment of the law or an exemption for certain affected individuals or businesses. Alternatively, they could argue for more explicit disclosure requirements for institutionally-aligned advisers.
In a communication to members attaching the legal guidance, Mr Johnston said the association would support either of these options, including potentially establishing a legal fund to challenge ASIC in the courts and making approaches to submissions policymakers.
The final option, Mr Johnston said, would be to accept the changes and make use of the “leniency” ASIC has granted to AIOFP members by letting them market their membership of the association to consumers alongside an accompanying disclaimer explaining they may accept commissions.
“923A has been used by the institutions to try and make all advisers look the same,” Mr Johnston said. “[The new clarification and AIOFP exemption] now actually allows us to differentiate AIOFP members in the consumer market, which must be an advantage for us.”
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