Advisers will pay price for fiduciary duty reforms
The consequences of breaching fiduciary duty under the Government’s Future of Financial Advice (FOFA) reforms could be much steeper than first thought, with the possibility of maximum fines jumping from $500 to $200,000.
According to Radar Results, an authorised representative’s current defence is to simply rely on their licensee’s instructions and advice.
However, if the new legislation is passed, advisers operating under an Australian Financial Services Licence will be required by law to put clients’ interests ahead of their own.
Radar Results believes the proposed reform may place an adviser in a position similar to that of a company director, who if found to be reckless would be fined a maximum of $200,000 under a civil action.
If the Australian Securities and Investments Commission becomes involved in the complaint, the new reform will also allow for criminal liability and a prison sentence of up to five years.
It will also allow for court-awarded compensation paid by the adviser to the client.
Last month, the Association of Financial Advisers’ white paper on the FOFA reforms found that 76 per cent of advisers strongly supported the introduction of a statutory fiduciary duty.
However, Radar Results claimed this support could be because advisers don’t believe the legislation will have an impact on them, despite the consequences of changing from a $500 fine, no jail and no compensation to the possibility of a maximum $200,000 fine, five years jail and a compensation payment.
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