FPA backs wider ASIC banning powers

The Financial Planning Association has strongly backed the Australian Securities and Investments Commission’s (ASIC’s) powers, arguing the regulator should have the ability to ban anyone in a financial services business whose actions have adversely affected a consumer, led to a breach of financial services law, or posed a potential threat to consumers and their financial position though their actions.

In a submission filed with the Treasury, the FPA pointed to the legal obligations imposed on planners by the Future of Financial Advice (FOFA) to act in the best interests of clients and said it was equally important that the law required directors and management of advice businesses “to be equally responsible for ensuring the organisation operates with the client’s interest being placed foremost in their operations and therefore at the same level as other legal and directors’ obligations”.

“By aligning outcomes for consumers from the Board level down through all advice organisations, a cultural alignment is made in the client’s interests through all levels of the AFSL [Australian financial services licence],” the submission said. “While many large AFSLs have now introduced customer advocate positions in their executive leadership, the creation of additional powers for ASIC to ban individuals from directors down creates a greater legal imperative for the whole organisation to place client’s interest foremost.”

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“Where there is a systemic failure to ensure clients are placed first, directors and management who neglect this obligation should face the consequences of these failures,” the FPA submission said.

It said the FPA believed such additional powers would further encourage new governance structures, business requirements and measurements to be put in place to ensure that the client best interest duty was being delivered upon, as advice failures were the responsibility of the whole organisation, not just the individual providing the service.

“To ensure that the new ASIC banning powers are applied effectively across financial advice businesses, the FPA proposes that ‘manager’ be defined as someone who is managerially responsibly for advice being provided,” the submission said.

The submission highlighted that while financial advice providers, directors and company secretaries were regulated and registered with ASIC, there was not currently a public register or requirement for management of financial services organisations to be registered.

“For this reason we question where ASIC will publish and record banning orders in relation to financial services managers,” it said.

The submission said it would also encourage the ASIC Enforcement Review to consider whether section 961J of the Corporations Act should be expanded to management and directors of advice AFSLs to ensure ASIC’s banning powers were able to work efficiently in improving the cultural alignment of businesses and clients.

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I agree but only if this includes AFSL management and directors

We only want honest planners in the profession . ASIC's banning powers should be expanded and used to achieve this end

This proposal sounds attractive but 2 issues arise: (1) ASIC does not have the resources to properly enforce the law that are already in place - I don't see what will be achieved by giving ASIC more powers when it does not use the powers that it currently has and (2) what these laws actually do is push direct responsibility for regulatory issues on to staff who do not have actual managerial authority - they are given titles which attract regulatory interest such as Responsible Manager, Responsible Executive or Head of Compliance but the people who actually run the firm avoid holding positions that would make them an obvious target for regulatory action.

The role of Responsible Manager is a currently a position of office and has no real responsibility or accountability. If the role had enforceable accountability, then those in the role or considering accepting the position would take it more seriously and actually supervise and enforce the AFSL conditions. If the AFSL is questionable, then they will struggle to get RMs to take on that role and then their AFSL will be in doubt due to capability issues (RG 105). I am confident this would set the cat amongst the pigeons and ensure that those really in positions of influence are wither doing the right thing or are in the firing line if not.

ASIC powers should also be expanded to banning FPA directors. The FPA getting kickbacks from AMP and other fund managers and then lobbying the Labor Government during FoFA caused some adverse outcomes for the financial planning community. An FPA director negotiating a payment via the professional partner program and then using that product in their firm is a clear conflict of interest...currently untouchable.

ASIC don't understand us and are staffed by people who neither care nor respect our profession, and that won't change with the current leadership. They take a shotgun approach now and can't handle it, but hey let's give them a fully automatic weapon instead! Brilliance FPA, pure genius yet again, just like the whole way you handled FOFA, LIF, FDS, Opt In etc

How about ASIC starting with the cartel behaviour of the FSC in collectively increasing premiums and corruptly misleading government over the LIF. Or some of their own with the misrepresented Life insurance review. Everyone would like to think that senior management will be held responsible for the more serious scandals that had nothing to do with advisers but I think the sad truth is that they won't. Too many of ASIC's senior staff end up sitting on the boards of the very same companies.

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