AFA accuses Govt of interfering in AFSL contracts
The Federal Government has been accused of unilaterally seeking to alter the contract which exists between Australian Financial Services Licensees and the Australian Financial Complaints Authority (AFCA) by allowing the authority to deal with complaints dating back to 2008.
In a submission filed with AFCA, the Association of Financial Advisers raised the issue of the Commonwealth seeking to alter the terms of a contract entered into by other parties.
What is more, the AFA warned that the Government’s move would result in the inclusion of complaints “that would be outside the statute of limitations if they were considered by a court of law”.
The AFA submission described the AFCA scheme as an external dispute resolution scheme that is mandatory for all AFSLs and one within which “participating entities are contractually bound to comply with a set of rules that dictate which complaints will be considered and the way that these complaints will be dealt with”.
“This is in effect a contractual arrangement between the AFSL and AFCA,” it said. “It seems remarkable to us that the Government can change that contractual arrangement between the AFSLs and AFCA without any ability for consultation with AFSLs.”
“In our view, this decision to extend the application of the scheme to the period dating back to 1 January 2008 is entirely arbitrary,” the AFA submission said. “The selection of this date seems to be that it is the effective beginning date for the original request from the Royal Commission to provide details of misconduct. We see no basis for this date to be used to extend the application of the AFCA EDR scheme. We particularly note that the selection of this date will result in the potential inclusion of matters that related to the Global Financial Crisis.”
The AFA submission listed the reasons it opposed the Government’s changes, including the likelihood that it would give rise to ambulance-chasing lawyers and drive up the cost of professional indemnity insurance.
“It is our view that this is a flawed proposal that is likely to create numerous unintended consequences. This is also an example of retrospective legislation that is inconsistent with the accepted convention for legislative change,” it said.
Recommended for you
With an advice M&A deal taking around six months to enact, two experts have shared their tips on how buyers and sellers can avoid “deal fatigue” and prevent potential deals from collapsing.
Several financial advisers have been shortlisted in the ninth annual Women in Finance Awards 2025, to be held on 14 November.
Digital advice tools are on the rise, but licensees will need to ensure they still meet adviser obligations or potentially risk a class action if clients lose money from a rogue algorithm.
Shaw and Partners has merged with Sydney wealth manager Kennedy Partners Wealth, while Ord Minnett has hired a private wealth adviser from Morgan Stanley.
