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Small financial firms shunted under new govt legislation
20/06/2012 - About 450 Australian financial services businesses will be adversely affected by new federal government regulations that will prevent them from charging standard brokerage fees on client share trades, according to peak industry body, the Australasian Securities Dealers Association (ASDA).
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Fourty-two large stockbrokers have been exempted.
Peak industry body, the Australasian Securities Dealers Association (ASDA), warns these businesses stand to lose profitability and jobs under new regulations proposed as part of the government's Future of Financial Advice (FOFA) legislation.
ASDA chairman Jamie Coote said the proposed regulations announced on 14 June, allowed for brokerage to be charged by only 42 ASX listed stockbrokers.
Currently there are about 450 firms that provide advice and trade in direct equities on behalf of around 2.2 million clients.
Under the proposed changes these firms would no longer be able to charge standard brokerage fees on client share trades.
"This could potentially force a large number of these financial services firms to close or reduce staff numbers," he said.
"I would have thought in the current climate the government would be doing all it could to safeguard employment. This is a direct hit to hundreds of Australian businesses."
"Perhaps even more astonishing is that the big established brokers have received privileged treatment."
Coote said consumers would also lose out because the draft legislation limits choice and will curtail competition for financial advice.
"The draft seems to discriminate against investor's choice of service provider by allowing only the 42 members of the ASX (participants) to charge brokerage," he said.
"These other service providers have established solid relationships with clients and invest with integrity on their behalf. It now appears you have to be a member of the ‘old school set' to be allowed to trade in equities. We argue this is discriminatory, elitist and unfair."
The draft regulations are intended to complement the Future of Financial Advice Bills (FOFA) Bills that have passed the House of Representatives and are due to come before the Senate later this month.
It is expected the legislation will take effect in 2013.
The Assistant Treasurer and Minister for Financial Services, The Hon Bill Shorten (MP) has consistently said that stockbrokers would not be disadvantaged by the Future of Financial Advice legislation.
Shadow ministry modelling suggests the FOFA legislation will add AUD$400 million to consumer fees for seeking professional investment advice.
Source: Monsoon Communications
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