In brief
As a lawyer working in the field of financial regulation, I have become pretty inured to said regulation producing weird, unintended outcomes. Even so, there are two outcomes produced by recently enacted laws that are unequivocally crazy.
Design and distribution obligations
The main purpose of the design and distribution obligations regime is to increase the chances of people acquiring 'suitable' financial products. You might think that complex, structured and other potentially dangerous products would be squarely in the frame.
So what does the regime catch? A home loan is caught. A savings account with a bank is caught. Both products are widely used and, unless you borrow to invest in a newly constructed Sydney apartment, they are not generally considered dangerous. And yet a margin loan is not caught. Now there will be a number of former margin borrowers out there who might venture to suggest that margin loans are not necessarily at the safe end of the spectrum.
How did this happen? At best it appears to be a mistake. For an observer, the legislative process compares unfavourably with the sausage-making process.
Protecting Your Super
Hello, my name is Cyril. You might think it is a funny name, but I am featuring in an example in the Explanatory Memorandum to the PYS Bill, and people in those sorts of examples almost always have funny names.
I started a new job a few years ago and my employer enrolled me in a superannuation fund. Recently I told the super fund to allocate my contributions to a different investment option. My super fund gave me default insurance cover when I joined. Now they've written to me saying my 'MySuper' product is 'inactive' and they will have to cancel my cover unless I give them a 'notice in writing'.
I am confused. First, why are they saying my superannuation is inactive when my employer pays into it every month? Secondly, what is this 'MySuper' nonsense? If you think Cyril is a funny name, well, I think MySuper is an even funnier name. Thirdly, why are they telling me I can give a 'notice in writing' over the phone?
When I asked my super fund what they were on about they said they had to cancel my cover under something called 'Protecting Your Super'. Another funny name. And finally, they said that when they contacted APRA about it, APRA referred them to a 'frequently asked question'. And apparently, I also have a 'choice' product. A less funny name, especially if 'choice' has the same meaning as in, say, a 'choice' apple.
At this point I gave up, refused to give a 'notice in writing' and I am not entirely sure what happens next.