The Australian Securities and Investments Commission (ASIC) should focus its increased powers and ability to impose harsher penalties on those seeking to provide unlicensed advice, rather than licensed planners guilty of no more than unintentional mistakes, according to the Financial Planning Association (FPA).
In a submission responding to ASIC Enforcement Taskforce position paper on Strengthening Penalties for Corporate and Financial Sector Misconduct, the FPA makes clear that it wants the regulator to move away from a regime based on the harsh imposition of compliance around disclosure while overlooking the greater threat posed by those providing unlicensed advice.
In doing so, the FPA pointed out that the penalties open to being imposed by ASIC were greater for financial planners unintentionally breaching disclosure rule than they were for people found guilty of providing unlicensed advice.
The FPA submission said it was been proposed to the penalty for defective disclosure be increased to a maximum penalty of 10 years’ imprisonment while, in contrast, the proposed maximum penalty for unlicensed conduct was five years.
“We disagree that the proposed penalty increases are in proportion to the dishonest and intentional
conduct, and the consumer detriment related to a breach these provisions,” it said. “Unlicensed conduct shows intent to behave and act dishonestly and against the law – that is a person
actively decides to provide a financial service with no licence, authorisation, or against a banning order.
“This conduct shows deliberate criminal intent for personal gain, to avoid the requirements of the law which have been put in place to protect consumers. This leaves retail consumers completely exposed to the wrongdoing by a person who more than likely does not meet the high competency requirements of the licensing regime, with no or little course for redress,” the FPA submission said. “Such behaviour warrants the maximum criminal sanctions, pecuniary penalties and disgorgement measures.”
“The current regulatory framework for financial advice has been built around a very compliance driven disclosure regime. However, evidence shows that disclosure does not lead to improvements in the quality of financial advice,” it said.
The FPA said it was for these reasons it found it disappointing that the Taskforce was continuing the focus on the disclosure regime, proposing criminal penalties for breaches of financial advice disclosure provisions that were double the proposed imprisonment penalties for unlicensed conduct.
“A breach of the financial advice disclosure provisions may not be intentional or even in the control of the provider. The onus of evidential proof is placed on the defender in relation to potential breaches of the disclosure requirements in the Corporations Act. For such potential breaches there may be circumstances where intent may not be able to be definitively determined which creates an element of doubt in such cases.”