Chris Pearce, the Parliamentary Secretary to the Treasurer, told I&T News yesterday that the Government has no intention of legislating to cap or outlaw commissions on financial services products.

Pearce said it “was not the role of the government to legislate the business model of the whole industry” and that current disclosure regulations should be sufficient. “The challenge is to make the disclosure readable and understandable for consumers. The industry has asked for clear and concise direction from ASIC about how to achieve this, which they have received and now it’s up to them to follow these directions.” “But we won’t change the law for an entire business based on the bad behaviour of one or two,” Pearce said. Despite this he said the government was “always looking for gaps in the legislation”. “But we need firm evidence there is a gap and then a cost/benefit analysis of legislating any change.” However, the Government has flagged a number of important changes to the financial services regime in its Regulation Consultation Paper. One of the suggestions is to create a central register of stockbrokers, financial planners and other financial services providers who have been punished for illegal and/or unethical behaviour. The consultation document notes: “There are a number of examples of an individual moving from firm to firm causing legal and regulatory problems for the organisation, and significant losses for clients, because the firm was not aware of sanctions imposed on that individual in the past.” Pearce said a central register of individuals who had been sanctioned by ASIC for illegal behaviour could be managed by the regulator or the industry. As well the Government is calling on submissions for ways to make the rationalisation products much easier. The paper noted that there are around 7,600 funds or other products in Australia with total investment of around $691 billion – compared to the US where $10,809 billion is invested in around 8,000 funds/products. The main barrier to rationalisation has been the tax consequences of closing down funds and Pearce said he looked forward to suggestions from the industry about how to manage such a transition. Those wanting to submit to the consultation process have until May 19 to do so.

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