ASIC launches nationwide licensee audit
The Australian Securities and Investments Commission (ASIC) is conducting an exhaustive audit of the operations of the country’s largest Australian Financial Services Licensees (AFSLs).
The regulator is conducting the investigation through a probing 812-question document, which Money Management understands has been issued to 20-30 of Australia’s largest institutionally owned and independent dealer groups. The majority of financial advisers operate under the umbrella of the top-30 dealer groups.
The questionnaire has been issued under a Notice of Direction, meaning licensees must comply with the request, with significant penalties for the submission of incomplete or incorrect information.
The 812 questions cover all licensee operations, including specific details about the nature of the licensees’ client base, advisory force and all financial products and services promoted.
Remuneration practices, soft dollar incentives and product rebates paid to licensees are under scrutiny, while the regulator has also demanded information regarding what percentage of licensee funds are distributed to various investment platforms.
ASIC is also requesting information regarding the number of licensees’ ‘active’ clients compared to total client numbers, the number of clients seen in the last 12 months, and the extent of ‘execution only’ advice undertaken.
The regulator has given the licensees involved no indication of what the information might be used for. Money Management understands the questionnaire was issued to licensees in the week before Christmas and originated from the regulator’s ‘financial adviser’ silo. This indicates the process is a market intelligence issue rather than a precursor for regulatory action, which is generally preceded by notices originating from the enforcement division.
The questionnaire covers the use of traditional wealth management and protection products — such as insurance, superannuation and managed funds — as well as delving into licensees’ use of capital protected products, hedge funds and unlisted and illiquid investments.
Money Management understands the information being sought is statistical in nature; for example, the percentage of a licensee’s clients employing gearing strategies, as well as the percentage of the client’s geared to un-geared assets.
In particular, the regulator wants to know the percentage of client investments directed to various products and asset classes as a percentage of total funds under advice.
The level and nature of advice given to self-managed superannuation fund trustees is also explored, as are licensee support services, such as research, technical and compliance capabilities and adviser education. Complaints, compliance breaches and professional indemnity insurance details are also covered.
The information is requested for the 2008 and 2009 calendar years, and the deadline for submission is March 5.
Last year ASIC requested a number of AFSLs produce information and documents demonstrating the advice given by a select group of authorised representatives. No mention was or has been made of that
project’s purpose.
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