The Financial Planning Association has strongly backed the Australian Securities and Investments Commission’s (ASIC’s) powers, arguing the regulator should have the ability to ban anyone in a financial services business whose actions have adversely affected a consumer, led to a breach of financial services law, or posed a potential threat to consumers and their financial position though their actions.
In a submission filed with the Treasury, the FPA pointed to the legal obligations imposed on planners by the Future of Financial Advice (FOFA) to act in the best interests of clients and said it was equally important that the law required directors and management of advice businesses “to be equally responsible for ensuring the organisation operates with the client’s interest being placed foremost in their operations and therefore at the same level as other legal and directors’ obligations”.
“By aligning outcomes for consumers from the Board level down through all advice organisations, a cultural alignment is made in the client’s interests through all levels of the AFSL [Australian financial services licence],” the submission said. “While many large AFSLs have now introduced customer advocate positions in their executive leadership, the creation of additional powers for ASIC to ban individuals from directors down creates a greater legal imperative for the whole organisation to place client’s interest foremost.”
“Where there is a systemic failure to ensure clients are placed first, directors and management who neglect this obligation should face the consequences of these failures,” the FPA submission said.
It said the FPA believed such additional powers would further encourage new governance structures, business requirements and measurements to be put in place to ensure that the client best interest duty was being delivered upon, as advice failures were the responsibility of the whole organisation, not just the individual providing the service.
“To ensure that the new ASIC banning powers are applied effectively across financial advice businesses, the FPA proposes that ‘manager’ be defined as someone who is managerially responsibly for advice being provided,” the submission said.
The submission highlighted that while financial advice providers, directors and company secretaries were regulated and registered with ASIC, there was not currently a public register or requirement for management of financial services organisations to be registered.
“For this reason we question where ASIC will publish and record banning orders in relation to financial services managers,” it said.
The submission said it would also encourage the ASIC Enforcement Review to consider whether section 961J of the Corporations Act should be expanded to management and directors of advice AFSLs to ensure ASIC’s banning powers were able to work efficiently in improving the cultural alignment of businesses and clients.
