Advisers surprised by breaches reported to ASIC

An increasing number of financial advisers who are getting their own Australian financial services licence (AFSL) or moving to smaller boutiques have found themselves to be the subject of a breach notification without prior knowledge.

Speaking to Money Management, Holley Nethercote partner, Paul Derham, said this was the latest problem to arise from the raft of compliance layers that were coming into place over the next few months.

“There have been a number of advisers who have been subject to a breach notification or some other notification as a previous licensee has gone and told something negative to the Australian Securities and Investments Commission [ASIC] but the adviser did not know,” he said.

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“We’re starting to see a lot of that happen with advisers going and getting their own licences and going to smaller boutiques and then discovering things have been said about them.

“This is not a problem for everyone but it’s a new problem now that larger dealer groups are reporting so much misconduct and that’s a new thing.”

The new breach reporting regime would commence on 1 October, 2021, and licensees must lodge a report within 30 days of when they believed there would be or had been a significant breach.

However, Derham said a lot of bigger dealer groups had been reporting things that “might not even meet the current definition of a breach”.

“Advisers don’t know it’s happening and they’re applying for licences and then ASIC says ‘we’re going to impose a compliance consultant condition or limit you in this way or show us what your responses are to these allegations’,” he said.

“And sometimes advisers are surprised when they can’t get information from their dealer group [about the report].”

Derham noted there were shared support offerings by law firms and some banks for advisers looking to go out on their own.

“You can go out on your own these days and get that wrap around support that you need that’s more available than that’s been,” he said.

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I am sorry to confirm that this happens all the time as the ultimate FU to advises choosing to change AFSL providers. We always do a reference check with the previous licensee once the adviser is approved for appointment and resigns from their existing licensee. When we do the reference check, we occasionally hear that this adviser has a recorded breach against them and they should not be appointed, On deeper investigation, the breach recorded is something like a possible failure to provide an FSG to a client a few years ago which has not and cannot be substantiated or was ever investigated further.

so a licensee deliberately tried to sabotage an adviser from leaving.

did you let the adviser know that is what happened, and they just let it go?

Always spoke to the adviser to get their side of the story and in EVERY case, what we had been told by the AFSL the adviser was leaving was BS which could not be substantiated.

so knowingly and deliberately with a malicious intent to defame and slander someone.

All class, arnt they? Like a jilted lover, some of these licensees hold a grudge like you would not believe. AMP/ Charter are a case study in it.

So the big 4 banks, AMP & ASIC lead us all to the disaster that was the very widely known 10 plus year problem of Fees for No Service at big Insto.
And now the same Insto and ASIC try to kill Advisers to get back some of their shame.
What an absolute disgusting mess the banks and ASIC continue to torture Real Advisers with.

the best thing advisers can do is to exit, and quickly.

this is why individual registration of advisers is so important. as a profession, we have failed to manage our own reputation which the media slander on a regular basis. I know that melissa Caddick was once a registered adviser, but how long can you keep referring to someone who was once registered as an adviser as still being a registered adviser long after they ceased being one, a lifetime? or is it because the media need a sensational story to sell papers and increase clicks and to appease to everyone else.

why don't the FPA and AFA spend some of their money instead of it sitting in a term deposit to counter the mismanagement of our professional image?

and to think that the term "financial planner" and "financial adviser" are actually restricted terms which can only be used by and to describe someone who is currently authorized and a relevant provider and the regulator themselves (in the case of Caddick) referred to her as a financial planner WTF!

this is actually on the record while giving a response to Jason Falinski (I believe) when asked why ASIC was calling her a financial planner when in fact she hasn't been one for a very long time, they said, she was a registered planner once.

Having run our own boutique AFSL for a number of years now, it is interesting to see how the ex-solicitors within ASIC strategize and lay traps, just like they attempted in their failed legal careers.

A while ago, ASIC released a edict to AFSLs that they had to record ANY breaches, large or small. The advice from a range of compliance consultants (we've used insto aligned compliance groups like BT, other groups who come solely from a legal background in fin services, and then others who have only ever been compliance professionals - so a quite wide range), is that it is better to have some breaches on the internal records than none, as none can be perceived to be that we're not monitoring FP's or else simply ignorant of the regulations or inept.

ASIC then released their subsequent move, which is that breaches now must be not only recorded but also reported to ASIC.

This then not only provides ASIC with firepower (report to parliament and ongoing media slander describing the large number of breaches by FP's, painting us as remaining villainous despite FASEA implementation), but also is an indelible record against any of those individual planners' records.

While we are only a small tight knit business, I can imagine that for larger AFSL's, especially those that aim to attract other businesses or external planners to its license, that once a planner decides to leave their group that they really couldn't care if any reported breaches cause havoc in their lives.

The only real conclusion I draw from this is that there likely will be vindictive AFSL's who purposely make it difficult for leaving planners to continue, but more realistically, that ASIC is corrupt and is still orchestrating behind the scenes how to cull our numbers even further. Ergo, breach reporting is simply one of those killing tools cleverly concealed under the guise of 'good governance'.

The conspiracy theorist inside me would say that this is a continuation after purposely providing Haynes with biased information against our profession during the Royal Commission but not quite achieving the hellfire they thought would rain down on us.


agree. The chain of AFSL needs to be broken and I've read that the Law Reform Commission are thinking of pulling Chapter 7 from the Corps act - advice/product nexus - to assist. You could argue the big AFSL's have egged ASIC on to impose onerous obligations, so they could appear the only protected solution via scale in providing AFSL, and then putting dirt on the small player.

of course, the big AFSL's have used the regulatory tool to kick us in the head for the very reason you describe. it still hasn't become apparent to the regulator and government that they have been had. or they don't want to capitulate yet that they have been had.

why am I (the adviser) still getting my head kicked in, I already have a master's in fp and passed the fasea exam. I will have obtained my master's 8 years before the official requirement sets in and my grd dip 10 years before, and I am still being abused, harassed, slandered, and defamed.

Unfortunately worse is to come for you. Your qualification will soon be deemed invalid because of its age, and you will be forced to repeat your education. You will be in the same boat as those of us who studied core financial planning principles in other courses at real universities, before "financial planning degrees" were invented to pad out the product offering of pretend universities like Griffith.

There is no point completing any FASEA education until the very last minute. That way it will have a longer shelf life before the next cabal of corrupt course providers deem it to be worthless.

"This is what happens when you let lawyers regulate finance. the only numbers they understand is the one on their invoice"(Joachim Klement CFA)

We've already deemed FASEA to be worthless. You mean winning some aspect will be to our own detriment? :P

This issue is symptomatic of what that idiot Hayne just didn't get about financial advice. The current licensee model is routinely abused as a tool to increase inhouse product sales. Advisers who don't sell enough inhouse product, or try to leave and go elsewhere, will be subject to weaponised "compliance". Those who sell lots of inhouse product will be given compliance immunity.

The old fool looked at a few bad adviser examples and concluded that licensees didn't have "adequate control measures in place". Rubbish. Vertically integrated licensees chose not to use those control mechanisms against the bad examples in question, because they were selling lots of inhouse product. Then Hayne blithely goes on to recommend a whole bunch of extra licensee coercion tools like "mandatory reference checking" which licensee's can withhold or write negatively, for those advisers who don't sell enough of their product.

Meanwhile Hayne did absolutely nothing about the two biggest problems which are the root cause of most others and stand out like dog's balls... vertical integration and dealer group based licensing.

Hayne makes me wonder about all the other decision he took in his career in Law.

senile old fool. what was the deal with him not shaking the treasurer's hand when he handed down the report. I didn't get that, can somebody explain it to me, please.

Remember his report was released late?

The main reason was that under protestation, he provided the draft to the LNP Gov first and then was forced to revise his final report. Being an ex-judge, Haynes felt that his word should have been sacrosanct and untouchable.

Even though AIOFP and others argue the LNP do/did nothing for us, at least Morrisson and Frydenberg forced Haynes to remove the worst aspects that would have essentially ensured we couldn't operate with any real commercial success at all.

We still have had a pile of BS loaded onto us and our lives now are far harder and unfortunately a large percentage aren't continuing on, but for all the current pain, it would have been unworkable entirely if the misinformed and inept Haynes had been free to release his initial views.

Since you don't even know the guy's name, I very much doubt your wacky story about him being forced to revise is true.

Check the timeline sweetie pie, check the facts around release dates, check the news reports, check the RC records and statements regarding the release dates, check both the government and opposition media releases on the RC at that time and also check your mouth... but then again you strike me as someone happy to be the big guy behind a keyboard. Probably so intelligent you're in the AIOFP :) :) :) :) And such a lovely disposition you have :) :) :)

Kenneth Hayne, ordinary man. not a God. we don't need to know his full legal name. he is not a god, was just a lawyer and judge. and even many legal scholars questioned his judgement after the royal commission including many ex-senior judges of similar stature.

he did not bring the universe into existence out of his sheer will.

get real pal.

No-one is suggesting that Hayne was God like, or even competent, or even awake all the time. But to say that his recommendations would have been even worse but for the secret intervention of Morrison & Frydenberg is delusional. It's hard to imagine how they could have been worse. And if the govt did attempt such an intervention Hayne would have gone straight to the media.

By all means make legitimate criticisms of the guy. But constantly spelling his name incorrectly and spruiking zany conspiracy theories just undermines the credibility of legitimate criticisms.

Hayne was on record indicating his disappointment for Government handling and without outright statement, hinted intervention to what he called 'due process'. This came after the official proceedings ended but before the report was finalised.

He then offered no comment on why the RC findings and recommendations were late, instead referring the media to his prior comments.

When questioned on whether he was satisfied with the end report and documented recommendations, he again proffered no comment, except to refer back to his prior comment.

I am a compliance consultant and avidly followed the RC, knowing what a change to the professional landscape this would be and believe 'savoury' is extremely close to the mark on why Hayne refused to shake the Treasurer's hand, as per the original query.

Having said that, 'Anon' I note with some wry observation that you haven't yourself attempted to answer the question but rather seem argumentative and anti-LNP?

Anon you sound like a red rag waving labor supporter upset that someone could suggest the Libs may have actually helped us.

I guess you also believe that no gov ever has interfered in any process it shouldn't have because they're all conspiracy theories hey?

Bet you also believe in pixies, unicorns and the published returns by industry super funds.

look at this as an example. the accountant does something like this and doesn't even get named or shamed. imagine if an adviser did something like this it would be a national headline and they would be on the internet never to be employed again in any capacity.

let's ruin him personally and professionally, and also his family too.

get in and make hay while the sun shines, it will all be over in 4 years when the ISF ponizi hoover vaccums up all of it. soon, they will charge us 4 writing insurance. MIA Hume, i just got bashed by a woman, can u pls ignore your portfolio and look after me plssssss

I was always bemused by that refusal to shake hands. But what you missed was the direct eye contact with the Treasurer as he extended his arm.
Hayne obviously wanted everyone to know He'd been got at. No question in my mind whatsoever.
Clearly evidenced by the lateness of the report because he was forced to amend it.
And sorry guys, it wasn't about you.
It was about the issues around vertical integration. That they could stay.
Even though everything evidenced that it had to be done away with.
It provided for an exit strategy that allowed both NAB and ANZ to sell to IOOF who were still in the game.
If vertical integration had to go these transactions would never of happened.
The irony of it all is the second biggest whipping boy of the Royal Commission, second only to AMP, became one of the biggest beneficiaries.
It picked up MLC and One Path at a fraction of what it would have paid yet it Saved ANZ and NAB from taking an even bigger bath.
Yes gentlemen, it was about saving the big end of town.
The Advisers are just pawns getting getting pushed around and in the end, sacrificed.

A 40 year Practitioner.

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