The Financial Planning Association (FPA) wants to see the Australian Financial Complaints Authority (AFCA) lose its ability to investigate what it sees as systemic issues involving financial planning licensees.
Instead, the FPA wants AFCA to be confined to reporting what it sees as systemic issues to the Australian Securities and Investments Commission (ASIC) and therefore precluded from charging licensees fees for any ongoing AFCA investigation.
In a submission filed as part of the Federal Treasury’s review of AFCA, the FPA had expressed concern that circumstances might arise where matters impacting licensees are not only being investigated by ASIC and the single disciplinary body but also by AFCA.
The FPA submission referred to the creation of a situation “where ASIC, the single disciplinary body, and AFCA are potentially investigating the same matter, and providing oversight of the licensee’s investigation of the same matter”.
“As discussed in FPA’s response to Terms of Reference 1.3 AFCA’s funding and fee structures, AFCA charges licensees additional and expensive fees for the EDR [external dispute resolution] scheme’s ongoing investigations of systemic issues. ASIC also charge licensees for its investigations of ‘reportable situations’ and oversight of the Corporations Act through its industry levy,” it said.
“It is unclear as to the new single disciplinary body’s involvement in such investigations and therefore any resulting cost-recovery for potentially investigating and providing oversight of advisers on the same ‘reportable situation’.”
“The FPA supports AFCA’s role in identifying systemic issues and notifying the firm and ASIC of suspected systemic issues. This is a vital consumer protection function. However, AFCA’s role in relation to investigating systemic issues further and requiring licensee action should be restricted to avoid unnecessary regulatory duplication and costs,” the FPA submission said.
“The new breach reporting, investigation and compensation obligations in the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 create a solid and consistent framework in the primary legislation under the extensive definition of ‘reportable situation’.
“Continuing AFCA’s current rules in relation to systemic issues will result in the duplication of obligations and potential directions from both AFCA and ASIC in relation to the same matter which will only cause inefficiencies and confusion for industry and consumers. ASIC as the regulator should determine any further action required and direct firms on such matters.”