The problems caused by 'weaponisation of compliance'

The 'weaponisation of compliance' is not just the fault of a 'few bad apples' according to lawyer Simon Carrodus, while advisers are increasingly facing higher compliance standards. 

Speaking at the Money Management Future of Wealth Management and Advice conference in Sydney, Carrodus, senior associate at The Fold Legal, and Phil Anderson, general manager for policy and professionalism at the Association of Financial Advisers (AFA), discussed the weaponisation of compliance, the increased scrutiny on advisers and its impact on those who were part of licencees. 

Carrodus said: “Licensees are cleaning shop and doing deep dives in files more than they ever did, they are applying a much harsher criteria and greater levels of scrutiny.

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"If you have an adviser who got an A, then another A then suddenly got a D then this can be weaponised in a variety of ways such as reducing the value of BOLR valuation or being classed as a 'bad apple'. This suggest everything is OK at the top level but that there are bad apples within. 

"After five, 10 examples then you have to think the problem isn’t a few bad apples but perhaps a problem with the licensee and the environment it creates.

"The way the audits are being conducted, the licensees are trying to say it isn’t their fault. It is disingenuous for the licensee to try to wash their hands of it."

Anderson said there had been numerous changes over the years which made it difficult for advisers to comply with all the new standards.

"The weaponising of compliance is broader than just BOLR. The big issue we face is standards have increased for advisers within the institutional licensees as part of the ASIC Report 515 Project and these are not visible to the full market. Under the ASIC Report 515 project, any single failure is a failure of the whole file and this is having an impact on those people who are part of licensees.

"You might have been OK a few years ago but now those new standards are being applied at a much higher level and it is a very difficult time."



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yes, I recieved a maximum black score in a compliance report recent on a client file, we had done a correct aged pension calculation, included all the correct assets etc, but in the appendix where we listed the clients details, we failed to put their 10K Car and 10K contents as Lifestyle assets - even though these were included in the calculation, the failure to get that detail right in the document, was enough.

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