Planners carry greatest regulatory onus
Inconsistencies exist between the responsibilities of directors and trustees of investment companies and responsible entities and those of financial planners which are serving to undermine consistent regulation of the financial services industry, according to PIS parent company, the Centrepoint Alliance.
Centrepoint has used its submission to the Senate Inquiry into the Scrutiny of Financial Advice to point out that while financial planners must bare a heavy regulatory burden, it is not a burden that is being by others in the financial services industry.
It said while failure by financial planners and their licensees to meet their regulatory obligations would see them being held solely or predominantly responsible for the client's losses, even though the consumer's financial losses may have been ultimately caused by the actions of the Responsible Entity, the directors or trustees of the investment company or trust.
"It is not Centrepoint's submission that advisers should have similar defences to directors and trustees or a loosening of the current financial advice laws," the submission said. "However, it would appear unjustifiably inconsistent when a director of an unlisted property company, such as Westpoint Corporation or Prime Retirement Trust, can have access to a loosely defined defence against claims of inappropriate conduct while the financial advisers who recommended investments in that company (often relying on investment ratings from a rating agency) have the onus to establish that several layers of obligations had been met."
It said that there certainly appeared to be a disproportionately greater risk for financial advisers than for other participants in the industry, "which creates a barrier to entry for financial advisers".
Financial advice laws should not be exempt from review and scrutiny, but they should not be considered in isolation from the conduct of other participants in the financial services industry," the submission said. "A holistic approach to assessments of financial advice and services laws, rather than a compartmentalised or segmented scale of inquiry, should always be the guiding measure."
AUTHOR
Mike Taylor
Recommended for you
Unregistered managed investment scheme operator Chris Marco has been sentenced after being found guilty of 43 fraud charges, receiving the highest sentence imposed by an Australian court regarding an ASIC criminal investigation.
ASIC has cancelled the AFSL of Sydney-based Arrumar Private after it failed to comply with the conditions of its licence.
Two investment advisory research houses have announced a merger to form a combined entity under the name Delta Portfolios.
The top five licensees are demonstrating a “strong recovery” from losses in the first half of the year, and the gap is narrowing between their respective adviser numbers.
