Financial victims unite to fight plans to water down consumer protection
|
Version 0 of 1. 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”. |