The Federal Government is proposing legislative changes which would obligate financial advisers or licensees to breach report other organisations or advisers.
The startling proposal is included in a consultative document issued by Treasury around the Financial Sector Reform (Hayne Royal Commission Response – Protecting Consumers (2020 Measures)) Bill 2020 implementing key recommendations of the Hayne Royal Commission.
The explanatory memorandum released by Treasury explains a significant expansion of the situations that would generate a need for licensees or planners to report to ASIC including:
- investigations about whether a specified breach or likely breach has occurred or will occur, and outcomes of those investigations;
- conduct constituting gross negligence or serious fraud (to the extent this conduct was not previously considered a breach of the financial services law); and
- where there are reasonable grounds to suspect that a reportable situation has arisen in relation to a financial adviser operating under another licence.
And it is this third category which has raised eyebrows around financial planning policy specialists such the Association of Financial Adviser’s (AFA’s) Phil Anderson who said he believed there were significant implications for financial advisers and their licensees from such an arrangement.
The explanatory memorandum went on to explains that “financial services licensees will have to report to ASIC about serious compliance concerns, which are reflected in the reportable situations, in relation to individual financial advisers operating under another licence. A copy of these reports will need to be provided to the licensee responsible for the financial adviser at the time the concern arose. Such reports are due within 30 calendar days.”
Elsewhere in the legislation, the Government would provide qualified legal privilege from defamation proceedings for licensees sharing information as part of a reference-checking related to advisers moving between licensees.