Investment advisers to face tougher rules

Financial advisers can expect to face much tougher licencing requirements.

Closer official scrutiny of their operations is also likely.

These developments are likely to follow a Federal parliamentary inquiry into Financial Services in Australia.

They were prompted, particularly, by the collapse of Storm Financial,  Opes Prime and other recent corporate failures.

Investors, who have lost millions in schemes promoted by companies like these are, mostly still waiting even for relatively meagre payouts.

All they have receive so far, at least in abundance, is sympathy.

The Federal Superannuation and Corporate Law Minister, Nick Sherry, added to that yesterday.

“The Rudd government feels for families affected by these corporate collapses,” he said.

That statement of concern was included in a press release Senator Sherry issued, welcoming the  inquiry, which will be conducted by  the Parliamentary Joint Committee on Corporations and Financial Services.

Committees like this one have strong powers both to compel witnesses to appear and to punish those whose evidence is seen to be either false or  misleading.

Some measures, tightening the rules under which financial advisers operate, have already been flagged.

A new national regime, which will be introduced into parliament by mid year, will include:-

• Making margin loans a financial product, under the Corporations Act.
• Dramatically increasing levels of simple, plain English disclosure documents, for new investment
• Compulsory disclosure of commissions
• Imposing a tough responsible lending obligation on all margin lenders
• Boosting consumer protections and options for redress, by requiring margin lenders to be licensed, properly trained and members of an external disputes body.

None of this, though, will ever replace the normal caution, that the investors themselves will still need.

The share market collapse, over recent months, has, at least contained on very important lesson.

It is that using equity in  your home, to play the stock market, is definitely not a one way bet.

That might have appeared to be so, in the past.

But that lesson must not be allowed to fade, in the years ahead.