Financial victims unite to fight plans to water down consumer protection
Those who lost millions in collapse of financial advice firms join backlash against Coalition plans to remove regulations
Victims who lost billions in the collapse of financial advice firms
such as Storm Financial are joining consumer groups, superannuant and
seniors associations and industry superannuation funds in an angry
backlash against the government’s plan to wind back new consumer
protection laws.
The Coalition’s much-vaunted “repeal day” on
Wednesday will include the Corporations Amendment (Streamlining of
Future of Financial Advice) Bill to implement the windback – once again
allowing advisers to earn sales commission and other so-called
“conflicted remuneration” from providing general financial advice and
removing the requirement for financial advisers to tell customers how
much they are receiving in commissions every year and give them the
chance to opt out of the arrangements every second year.
With the
legislation certain to be blocked by Labor and the Greens in the
existing Senate, which sits until 30 June, and many of the existing
requirements set to take effect from July, the government is also
planning to rush through regulations to try to implement its windback in
the meantime.
The opposition leader, Bill Shorten, said the
government’s proposed changes were “bad laws” and would mean “the
wholesale dismantling of oversight to protect our consumers”.
But
Tony Abbott said on Monday the former Labor government’s legal
protection laws – which his government is seeking to water down – were
“a classic case of regulatory overkill” because it was already an
“ethical given” that professional advisers would take into account the
best interests of their clients.
Mark Weir, the co-chair of the
Storm Investors Consumer Action group, and one of 120,000 Australians
who since 2006 have lost more than $6m through the collapse of firms
from which they received financial advice, doesn’t agree.
Storm
investors have written to the prime minister and other ministers
pleading for the retention of the laws, which came about as a direct
result of a lengthy parliamentary inquiry into the collapses that cost
many of them their life savings.
“I am very worried, the bottom
line is that these reforms were introduced to protect consumers and they
haven’t even been given a chance to work yet ... I am suspicious that
the financial industry might be pushing their vested interests here,”
Weir told Guardian Australia.
“Repeal day” – Wednesday 26 March – is exactly five years after the federal court placed Storm Financial into liquidation.
The
consumer group Choice, which is organising a campaign against the
proposed reforms, wrote to all senators on Tuesday asking them to oppose
the legislation and vote to disallow the regulations.
There is
also no guarantee the changes will pass the new Senate – the final
make-up of which will be determined by the West Australian Senate
election re-run on 5 April.
The independent senator Nick Xenophon
told Guardian Australia he had “serious concerns” about the changes
“which appear to be very retrograde”.
The financial planning
industry reaps more than $1.3bn a year in fees from people who have
sought advice about superannuation and retirement investments, including
through the controversial “trailing commissions” of which many
customers are unaware.
As Guardian Australia reported in February,
the strategy of trying to impose the changes through regulations to be
introduced by the end of March, could also be legally invalid according
to legal advice obtained by Industry Super Australia.
The advice,
from Arnold Bloch Leibler, suggested the regulations would be legally
invalid and the financial advisers relying on them open to future class
action challenges from their clients.
“We consider that such
regulations would be invalid and susceptible to challenge in the
courts,” the law firm said in the 11 February advice. “A court
declaration of invalidity would operate retrospectively. This means, for
example, financial advisers who relied on the regulations would be
found to have acted unlawfully. The regulations would therefore create
significant uncertainty and could well become the subject of protracted
litigation between financial advisers and their clients, for example, in
an investor class action.”
The regulations are being proposed by
the assistant treasurer, Arthur Sinodinos, who is under pressure over
his involvement with a company linked to the disgraced New South Wales
Labor figure Eddie Obeid, which is under investigation by the
Independent Commission Against Corruption.
Senator Sinodinos has
said he is “not so much rolling back the laws as clarifying them and how
they are going to apply in a number of cases” and that “the essential
consumer protections remain”.
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