Contentious reforms to proxy advice have been disallowed, following much criticism by industry groups over recent months.
Independent senator Rex Patrick’s move to disallow the regulations succeeded by 29 votes to 25.
The decision comes after Treasurer Josh Frydenberg was issued a letter by the bipartisan Senate committee that raised concerns about the December-announced regulations.
The reforms proposed that advisers must 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.
Speaking to ifa earlier this month, Morningstar ESG analyst Erica Hall – who criticised the reforms last month – said the reforms were “rushed through law” late last year and that the crux of the issue was that it did not go through the usual legislative process.
“The benefits are unclear as there has not been open discussions with all stakeholders. Changes made in the name of ‘transparency and accountability’, yet ironically the process by which these reforms have been introduced has been anything but transparent,” Ms Hall said.
“It is hard to understand why it was necessary to take such an approach.”
Senator Fierravanti-Wells also questioned the heavy penalties within the reforms that could see proxy advice firms hit with fines of over $11 million due to non-compliance.
Earlier this week, Labor’s financial services spokesman Stephen Jones blasted government’s “sneaky” proxy advice regulations, which he said have “no case for regulatory change”.
The decision has been welcomed by a number of industry groups, including the Australian Council of Superannuation Investors (ACSI), with CEO Louise Davidson slamming the proposed reforms as “rushed through without parliamentary scrutiny and with no justification, rationale or harm identified”.
“Proxy advisers faced more onerous red tape and fines of up to $11 million for small administrative errors, and unprecedented rules regulating ownership of advisers,” Ms Davidson said.
“We are pleased to see the Senate voted to ensure the system that has been working well to deliver quality advice that supports investors and millions superannuation fund members is maintained.”
Meanwhile, Jane Rennie – CPA Australia’s general manager external affairs, policy and advocacy – also applauded the news, saying the accounting body has had significant concerns about the legislation for both advisers and superannuation fund trustees.
“Proxy advice is part of a bouquet of information that funds take into consideration in their investment decisions. Although these reforms were aimed at proxy advisers, we were concerned that the same arguments could be made to require access to other types of advice provided on a confidential basis to trustees,” she said.
“Superannuation funds engage in a variety of activities designed to generate economies of scale, include outsourcing the provision of investment advice to proxy advisers. This is a cost effective way to provide value to members. Making trustees jump through increased compliance hurdles to access advice would not have been in members’ best financial interests.”
READ MORE: Rejected proxy advice reforms a ‘defeat for Treasuer Frydenberg’
Given the importance of superannuation to us all the proposed changes would make transparency in decision making better and aid in stopping decisions made for political reasons. Note the number of ex labour politicians and their staffers and friends on industry super boards. The corruption in the super industry (and finance sector generally) has to end
I can never understand why an accountant that knows the clients affairs better than anyone else cannot give general investment advice ( not which share to buy but advice on the types of investments and where to find more details) yet an “investment advisor” can charge $3000 – $6000 and print off 100 pages from a reference manual they have which the client never reads. What a rort..
After 3 years of attacking the advice industry, the chickens are coming home to roost for the big banking loving Josh and his mates.
Liberal Government possibly wouldn’t need this legislation if it had not concentrated Australia’s retirement FUM into Industry Super – but it did. Well done Josh Frydenberg.
Get used to the disappointment Frydenberg…this is just the start!
The current government loves making policy on the fly; just look what they’ve done to financial advice legislation.
They are an embarrassment to Australia.