A specialist financial services lawyer has urged advice firms to resist any attempts by the Australian Securities and Investments Commission (ASIC) to force them to accept remediation outcomes that involve them trading away hard-fought monetary limits through external dispute resolution schemes such as FOS.
The lawyer, imac legal & compliance principal, Ian McDermott said he believed ASIC was getting close to releasing its regulatory guidance on advice review and remediation programs having earlier suggested that "licensees may be required to waive any time limit, monetary or other limits that might constrain the EDR scheme's jurisdiction".
"But trading away monetary and other limits should not be supported in our view," McDermott said.
He said that while he had every sympathy for innocent people who had lost money as a result of poor advice or other conduct and believed it was important for them to have legal recourse to compensation where the wrong thing had been done, ASIC might be aiming to go too far.
"…it is going too far to expect advice firms to have a blank cheque awaiting the outcome of an EDR determination," McDermott said.
He said EDRs were not courts and did not have the same standards of evidence, rigorous analysis and procedure and were not bound by the precedence of their own decisions.
"What's more, in agreeing to be a member of such schemes, AFS licensees also agree to be bound by the decisions of the EDR scheme and not to pursue any legal rights of appeal," he said. "In other words, licensees already trade away many of the legal rights that are the bedrock of our justice system in order to provide a cost-effective EDR solution for consumers."
McDermott said that it was in these circumstances that it was not appropriate that AFS licensees should also waive monetary award and time limits.