There are significant delays between the Big Four banks and AMP first becoming aware of financial adviser misconduct and reporting breaches to the Australian Securities and Investments Commission (ASIC).
That is one of the findings from a review from ASIC of the Commonwealth Bank, Westpac, National Australia Bank (NAB), ANZ, and AMP, which formed part of ASIC’s broader Wealth Management Project.
In looking at how the institutions identified and dealt with non-compliant conduct by their financial advisers between 1 January 2009 and 30 June 2015, ASIC found critical failings in breach reporting, with institutions reporting breaches well after it became aware of issues of non-compliance from advisers.
The report, titled ‘Financial advice: Review of how large institutions oversee their advisers and checklists’ also found failure to notify ASIC about serious non-compliance concerns regarding adviser conduct, inadequate background and reference checking processes, and inadequate audit processes to determine whether the advice complied with the best interest duty and other obligations.
“We are aware that there is an industry-wide approach which considers that the time period for breach reporting commences only after the decision makers delegated to decide whether a breach should be reported have determined that the breach or likely breach is significant to the licensee,” the report found.
“This approach has led to considerable delays in reporting to ASIC. For example, in one instance, an institution acknowledged that 179 days had passed from when it first became aware of the suspected non-compliance to formally assessing the breach as significant, and subsequently lodging a breach report with ASIC.”
ASIC said it was currently involved in the Treasury’s taskforce to review ASIC’s enforcement regime, with the terms of reference including the adequacy of the frameworks for notifying ASIC of breaches of law.
ASIC deputy chair, Peter Kell said: Failure or delay in notifying ASIC of suspected serious non-compliant conduct significantly affects our ability to take appropriate enforcement or other regulatory action”.
“More importantly, it may also result in an increased risk of customer detriment as so-called ‘bad apple’ advisers continue to work in the industry.
“Strengthening breach reporting requirements will be an important issue in the current review of ASIC’s enforcement powers announced by Government in October 2016,” he said.
