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The Australian Securities and Investments Commission’s (ASIC) discussion paper on margin lending regulations has made real the concerns of dealer groups regarding altering their Australian Financial Services Licences (AFSLs).
The inclusion of margin lending under the Federal Government’s newly released National Consumer Credit Reform Package will require dealer groups to apply to ASIC for a variation of their AFSLs to continue to provide these loans in debt-related strategies.
GB Financial Management general manager Glenn Pearce said the change would require the dealer group to “decide by December next year whether we will change our licence to be able to continue that practice”.
In the meantime, he said, the dealer group will need to assess what potential impact the new bill is going to have on the advice strategies it presents to clients.
“Our concern over the change is less about our ability to recommend margin loans to clients and more about margin loans as a component of an overall strategy.
“If we decide not to apply for a variation we would have to evaluate how we present strategies to our clients, because we would not be able to specifically name the lending provider or its product in our strategy.
“In other words, we could be precluded from even the simple act of recommending that a client change a bank account unless we change our licence under the proposed changes.”
Australian Financial Services head of compliance Michael Butler said his “first impression” of the proposed legislation is that it is “far too complicated in replicating existing compliance and disclosure requirements”.
“I’m still not sure whether it’s sufficient for us to be licensed at the dealer group level
or whether the actual advisers are going
to be separately licensed.”
He said it was also unclear from the legislation “in its current form” whether it would also take in structured products that have a loan component attached to it.
“I can see that that issue alone will open up a real Pandora’s Box of issues for financial advisers, as well as accountants and product providers.”
Another consideration of the legislation for advisers is that the Financial Ombudsman Service (FOS) is charged with hearing complaints, he said.
