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Act may catch lawyers unaware

LAWYERS may not be exempt from the new provisions outlined in the Financial Services Reform Act, which came into force on March 11.

The Law Society of Western Australia has issued a warning that lawyers may be caught up in the new regime because of the ambiguity of the new provisions.

The new laws require anyone offering financial advice or products to hold a licence covering the financial services they provide. They also must meet various conduct and disclosure obligations, unless an exemption applies.

Law Society of WA president Clare Thompson said lawyers who did not generally deal in securities and financial products in the ordinary course of their business would qualify for exemption.

“The FSRA has raised significant concerns for the profession in the way lawyers give advice and the advice lawyers give to those who give financial advice,” Ms Thompson said.

“The original … legislation exempted advice given by a lawyer in his or her professional capacity about matters of the law, advice given as a necessary part of a lawyer’s activities, and advice given by a tax agent from the FSRA.

“However, there was some debate at the time as to whether the exemptions for lawyers were too wide, particularly in relation to advice given in the case of solicitors’ mortgage funds.”

While the law seems to make an exemption for lawyers, Ms Thompson said it could be possible that, in the future, the act could make the proviso that exemption existed “except as may be prescribed by the regulations”.

“As yet there is no proposal to limit the exemption, but practitioners need to be vigilant to the possibility and review the regulations on an ongoing basis,” she said.

In a recent seminar held by the law society, Flexiplan Australia Ltd legal counsel Andrew Taylor raised concerns about an anomaly in the new legislation that required self-managed superannuation funds to issue a product disclosure statement to their members.

Mr Taylor said this requirement was unnecessary and costly, as these SMSF’s could have no more than four members and were often used by small businesses, married couples and families.

“It seems a disproportionate cost for the trustees to prepare a PDS for such a small fund,” Mr Taylor said.

“In such circumstances it seems ridiculous for the trustee or trustees of an SMSF to issue a product disclosure statement. There is presently no exemption that would remove this obligation.”

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