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.

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“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.



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Finally a submission with some sense. AFCA have no purpose to deal with a Wholesale Client. We had a case where despite the 4 previous and 2 subsequent occasions that the client had signed and relied upon being a sophisticated investor, AFCA in its normal manner of being anti AFSL decided that the client was not aware of what he had signed and therefor was not a sophisticated investor and should not have been offered the investment. This led to a total fault finding against the member whilst the client laughed all the way to the new broker to invest their ill gotten gains in you guessed it Wholesale Investments. AFCA have proven themselves to be in capable of managing their mandate or acting in a fair and reasonable manner to the members and have learnt nothing from the DH Flinders Decision that found they acted outside their TOR and without procedural or actual fairness to their members.

Amazing. I've written before, they are now a business competitor and a business risk, in that they have their own budgets in this neo-con world and they derive bonuses etc from revenue just like we do. But their incentive is to collect complaints favourably, not just to regulate, this is the world we are in.

That fact that they have to be perused through the courts for any change to happen is sad and the Treasury review is the only hope. If every afsl did not submit to treasury then they are too a disgrace.

All great ideas, doubt many will happen. The exclude wholesale clients goes without saying. Sadly recent preso by AFCA they are proud to subjectively decide someone is not sophisticated enough to be even though a wholesale certificate existed. AFCA are not, day to day accountable to anyone. A closed shop. The model Is totally conflicted. The more complaints the more money for them. Lastly, the fact that IDR matters that go via them are still recorded and publicly released as a black mark against the member is another disgrace against fairness.

Sure. Just make sure that the definition represents genuinely wholesale clients. The definition (set 20 years ago) is used as a loophole by ratbags to avoid the consumer protections. Set the minimum net tangible asset threshold at $10M and this will help to avoid Mums and Dads getting sucked into things like Mayfair.

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