Has AFCA grown beyond its mandate?
The Australian Financial Complaints Authority (AFCA) would be precluded from hearing complaints from wholesale clients under revised arrangements being canvassed by the Stockbrokers and Financial Advisers Association (SFAA).
What is more, the SFAA wants the Government to trim back the amount of discretion allowed to AFCA on what complaints it can hear and to impose some obligations on those making the complaints.
In a submission filed with the Treasury’s review of AFCA, the SFAA has made clear that while it supports an external dispute resolution (EDR) scheme such as AFCA, it has serious concerns about the manner in which the AFCA regime has been allowed to evolve.
“We consider that the AFCA scheme has developed in a way that is no longer just a protection measure for small consumer complaints,” the submission said before claiming that:
“AFCA is now a scheme where:
- Complainants can claim for amounts up to $1,085,000;
- Member firms can have a binding award of over $500,000 made against them;
- Decisions are based on discretion and members have no practical recourse to appeal;
- Complainants can bring claims even though they are wholesale investors;
- If complainants are unhappy with the decision they can bring proceedings in a court of law after having had a ‘dry run’ in the AFCA system; and
- Member firms settle claims rather than proceed to a determination due to the scheme’s cost structure.”
The SFAA submission argued that to address these issues changes be made to the AFCA Complaint Resolution Scheme Rules to:
- Require complainants to ‘submit’ to the AFCA jurisdiction when they lodge a complaint and agree to be bound by the final decision. Alternatively, the rules could be changed to require complainants pay at least a nominal fee should they not accept AFCA’s preliminary view and progress the matter to a final decision;
- Reduce the amount of discretion that AFCA can exercise when dealing with complaints;
- Clarify that AFCA does not have jurisdiction to hear complaints from wholesale clients and include wholesale client complaints as a mandatory exclusion; and
- Require complainants who have not made a complaint first with a member firm to be referred back to the member firm to lodge a complaint directly with it before being able to lodge a complaint with AFCA.
Recommended for you
VBP consultant Sue Viskovic has warned advisers thinking of going self-licensed that they need to act “from a business head, not an adviser head” when it comes to scaling up their practice.
An inquiry is due to probe the collapse of Dixon Advisory and its impact on the Compensation Scheme of Last Resort.
A report has highlighted a growing appetite among high-net-worth individuals for private market investments, creating a significant opportunity for advisers.
The two firms have announced a new online development program to support career changers, advice support staff and university graduates in joining the financial advice profession.
