The reforms, announced in late December, will require proxy advisers to have an AFS licence to provide advice to institutional shareholders, to simultaneously share corporate governance advice to shareholder clients with the companies they are providing advice on and to be independent of their institutional clients by 1 July 2022.
Penalties within the reforms also note that proxy advice firms could be hit with fines of over $11 million due to non-compliance, which Mr Jones has slammed this week.
“This is akin to forcing a commercial lawyer to hand over confidential client conversations to the other side of a legal dispute,” Mr Jones said.
“Abrupt changes like this, introduced without proper debate or process, damage the regulatory stability on which our open market system depends.
“And they diminish transparency that, in times of volatility, investors large and small need now more than ever.”
Mr Jones’ comments come after Treasurer Josh Frydenberg was recently issued a letter by the bipartisan Senate committee that raised concerns about the reforms.
“The committee notes that despite the regulations imposing obligations that have a significant effect on licensees that provide proxy advice there is no justification in the explanatory statement as to why it is appropriate for the relevant matters to be dealt with by delegated legislation as opposed to primary legislation,” the letter read.
“The committee therefore requests your advice as to why it is considered necessary and appropriate to use delegated legislation, rather than primary legislation, to introduce significant new obligations on financial services licensees that provide proxy advice, noting in particular that this approach appears to be inconsistent with the guidance provided in the department of the Prime Minister and cabinet’s Legislation Handbook.”
Politicians’ interaction with the advice industry has increased in recent months ahead of this year’s federal election.
In December, Labor declared that if voted in it would significantly ease the education requirements on existing advisers by axing the need for experienced advisers.
Meanwhile just weeks later, the Association of Independently Owned Financial Professionals (AIOFP) told ifa that some of its members are reporting to have been contacted by Coalition politicians “seeking their views on the current legislation in café style meetings”.
“…by axing the need for experienced advisers.”
What???
Unusual for Labor to want to do anything positive for big business – an election year maybe