ASIC considers soft dollar surveillance

By Craig Phillips

The Australian Securities andInvestments Commission (ASIC) has given the industry a mixed report card in its anticipated report into the disclosure of soft-dollar benefits, and is now considering formal surveillance next financial year to ensure full disclosure.

ASIC commended a number of advisory groups for clearly explaining soft-dollar benefits in consumer-friendly language, while other firms where strongly criticised for leaving clients ‘in the dark’ with disclosure that is vague or, in extreme cases, non-existent.

“Consumers need to know if their adviser is in a position to give impartial advice, as this may affect their decision about whether to act on the advice,” ASIC executive director consumer protection and international Greg Tanzer says.

ASIC will request that those firms which may have inadequate disclosure to change their documentation, after assessing industry practice between December 2003 to March 2004.

The report identified 11 types of soft dollar benefits, varying in value from a gift of wine up to sources of revenue in the order of millions of dollars to an advice licensee.

Meanwhile, the peak regulator welcomed efforts by the FinancialPlanning Association (FPA) and the Investment and Financial Services Association (IFSA), and some firms to reduce conflicts of interest.

The ASIC report states disclosure that tended to be more effective for communication had several common features.

“The more effective examples gave the reader a broad understanding of context, scale, eligibility and source,” ASIC stated in the report.