The Financial Ombudsman Service (FOS) has called for the Australian Securities and Investments Commission (ASIC) to be better empowered to track and deal with authorised representatives who move through the industry despite leaving clients with uncompensated losses.
In a submission to the Joint Parliamentary Committee on Financial Services, FOS has made clear that it believes there are shortcomings in the manner in which ASIC can deal with wrongdoing in the financial services industry.
Citing a licensee who was found by the Finance Industry Complaints Service to be in multiple disputes, to have misappropriated client funds and to have been placed into voluntary liquidation, the submission said the licensee’s sole director had remained in the financial services industry as an authorised representative of another licensee for some time after the misappropriations before being banned by ASIC for six years.
“Generally, ASIC can only make a banning order against a person after giving the person an opportunity to appear or be represented at a hearing and to make submissions on the matter,” the FOS submission said.
“For the current regime to protect consumers, ASIC has to have highly effective ways to obtain information about threats to consumers and have the resources required to conduct any necessary investigations and hearings promptly.
“In our view, ASIC should investigate any case where authorised representatives remain in the industry after leaving their clients with uncompensated losses and should expedite the investigation and any necessary hearing in such a case,” the submission said.
It said if these steps were not taken quickly, the risk of further losses to clients increased.
The submission argued that measures might be needed to make it easier for ASIC to identify situations similar to the case it had cited, with, for instance, an authorised representative moving to another licensee being required to provide ASIC with information about past activities that would highlight involvement in financial losses.
“A simpler alternative may be for ASIC to make greater use of the information that it receives about authorised representatives moving between licensees,” the FOS submission said. “Licensing arrangements may also need to be reviewed to ensure they require licence applications to include sufficient information about past activities of proposed authorised representatives.”
