If you thought FoFA was dead, think again
If you thought that Wednesday’s ambush in the Senate was the end of the argument over the Abbott government’s Future of Financial Advice (FoFA) reforms, there is bad news. It was not.
Senator Nick Xenophon’s so-called “coalition of common sense” voted down FoFA, to cheers from consumer groups, boos and hisses from the financial sector, and general disapproval from the Finance Minister.
• Shonky advice protections saved at last minute
• Consumer groups warn on financial advice reforms
But this episode is another skirmish, not an end to the war, because the Senate only got rid of a regulation, which may not even take effect straight away.
Corporate regulator ASIC has announced that it will “facilitate an appropriate transition” back to Labor’s version of the protections until 1 July 2015, which means shonky financial advisors could feasibly escape penalty until then.
The backbone of this political squabble is the Corporations Act, which Labor amended back in 2013. Rather than repealing Labor’s changes, the Abbott government chose to rush through what is called ‘subordinate law’ — a move the Senate committee responsible for scrutinising such things strongly criticised.
The Scrutiny of Bills committee said back in July the government should have gone about changing the financial advice law the proper way, even if it took longer.
“[E]nabling a regulated industry to benefit from legislative change ‘as soon as possible’ is not a sufficient justification to achieve policy change through regulations rather than Parliamentary enactment as this justification could be claimed with respect to any proposal,” the committee said in its ninth report for the year.
Finance Minister Mathias Cormann responded by saying he needed to take “swift action”.
It was clearly a stopgap measure. If Senator Xenophon’s coalition had not revoked it, it would have ceased to exist on 31 December 2015 anyway. By choosing this option, the government also made it easier for the regulations to be reversed, as it needed only one of the houses of Parliament to move a motion to disallow it.
The Abbott government always intended to overwrite its hasty change with a heftier piece of ‘primary’ law — a new skeleton, rather than a change of clothes. In fact, this draft law has already passed the lower house and is languishing in the Senate.
The upper house has suddenly become very hostile to the changes, but the government is still hopeful.
Senator Cormann has played down the defeat and vowed to push this draft law through.
“We will continue to make our case,” he told ABC radio on Thursday.
It looks like the two sides will head back to the war room to thrash out a compromise out a new deal.
Independent senator Nick Xenophon has extended an olive branch to the government, saying he is willing to negotiate.
“I would like to think that there is room for some compromise, for some consensus to actually get a better outcome. And the olive branch to the Government is that I along with my crossbench colleagues are willing to sit down with the Government as a matter of urgency to get a better outcome,” he said the ABC on Wednesday evening.
This really is a neverending story, although one consumer group has made a plea for certainty, both for consumers and financial advisers.
“[W]e urge the Government to abandon further attempts to water-down this legislation, risking further uncertainty and adding to compliance costs for industry,” said CHOICE chief executive Alan Kirkland.