When planners get double the punishment of unlicensed operators

12 December 2017

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.

Related News:

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.”




Recommended for you




My client recently went to purchase a car and the car fiance guy packaged into the finance contract some Life, TPD and Income Protection insurance. There was no fact find, no SOA no nothing. Just sign here..... auto acceptance.

And ASIC think its this is ok. What a rort.

Now for me to cancel these policies i have to do a FF, compare these to the current policies, ROA and fill in the BID form. 4 hours work. no pay.

Its time to stop providing advice on Life insurances. Everyone other than advisers can do whatever they want without fear of losing their license whilst advisers get crucified and banned for forgetting to fill in the BID form even when its clearly in the clients' best interest.

yep, same with motorcycles - these companies are making more from the insurance and finance than from the margin on the car/bike product itself...it's a rort

Will just result in PI premiums rising which will be passed on to consumers. ASIC has not been doing its job, particularly with the banks,
and now financial advisers must pay for its incompetence !

Disclaimer: Please note that the FPA receives payments via Banks, IOOF and other product manufacturers and hides these as members fees. You need to be aware the opinions (whether right or wrong) expressed here may be influenced by these payments and may or may not represent the opinions of Financial Advisers or Australian Consumers and may be influenced by the said organisations.

So you're saying you disagree?

If the Australian Medical Board got millions of dollars from a drug company and then came out in support of a new drug made by that very same company, even if it was a good drug would you as the regulator be suspicious? Just drawing your attention that a potential conflict of interest may exist. Even if this message from the FPA was an appropriate submission or opinion on some matter Treasury, the Government, ASIC would probably dismiss it anyway as the voice of a large product manufacturer.

this is a really interesting study. Lets look at the system ASIC has set up. Does an unlicensed person have greater or lesser costs? Answer:- significantly less costs so they can undercut real advisers. Does an unlicensed person have to undertake more or less work to offer advice? Answer:- significantly less work, so can undercut real advisers. Does an unlicensed person have greater or lesser ability to charge the client? Answer:- both have to invoice the client so the same ability because commissions are dead, but the unlicensed person can be paid by cash to avoid tax. Does the unlicensed person have a harsher penalty if they do something wrong? Answer:- FOS will not look at the matter, and if it goes to ASIC the penalty is less harsh which seems to advantage the unlicensed person. Can an unlicensed person be banned from the industry? Answer:- Why would an unlicensed person care, just continue to work. So it seems to me that logically ASIC has setup a system designed to support unlicensed advice and make licensed advice more expensive, and bureaucratic, and therefore less attractive to clients. (Until something goes wrong, when the unlicensed adviser can walk away). Makes me wonder if this is deliberate, or I have understood something.

Robin you are definently on the right track there, this is a top post and really interesting to read thank you.

Your comment is very accurate Robin. It is unfortunate to have to come to this conclusion. But then again, based on the fact that ASIC wants to double the sentence for a financial advisers, it seems that ASIC is not predominantly motivated by a want to protect the consumer. It seems that they are primarily motivated by malevolence against financial advisers. How else could their objective for double the sentence be explained? I definitely believe that financial advice needs robust legislation but ASIC needs to recognise that there are many high quality decent financial advisers. A 10 year sentence for a mistake is unreasonable, it is more like something you would expect to read about in the Gulag Archipelago.

It is perhaps a sad statement that PSS super is advised by Guideway financial who state "The Guideway Group does not have ANY affiliations to a product or banking institutions." While the PSS super website states "* Our authorised financial planners are authorised to provide advice by Guideway Financial Services " Since all ASIC employees use PSS super and Guideway they may not really be aware of this obvious contradiction. However I am sure all ASIC will enthusiastically seek clarification on whether the PSS super advisers really do not have any affilation with with product provider. I guess I am just confused how they can claim to be PSS super advisrs and also not associated with PSS super. But I trust ASIC to not allow this type of thing to exist under their professional noses., or they could lose their credibility.

It's the same question I raised when the FPA Professional Practice's were admitted to several industry fund referral panels. First, you had to put the industry fund onto your APL to get the referral work. Second, you only got the referral work if you paid the additional fees to the FPA to be a professional practice. The problem as I see it, is the client really getting impartial advice. Would you really recommend a client leave the current arrangement in the knowledge you are receiving more and more referrals from that source. It probably isn't a big deal but it just didn't pass the 'vibe' test for mine.

Yes I agree. But with ASIC taking such a strong line on "independent" then I suggest this is a very bad look. The mandated super fund for ASIC employees claims the advisers are "theirs" while the AFSL claims not to have any affiliations. Either the Super fund is correct or the AFSL is correct, but I struggle to accept you can be owned by the Super and and also not affiliated with it..... It is just a sad look when you hassle others, but ignore the obvious in the super fund you use. Or perhaps no one in ASIC has ever paid for financial advice because they are on a scheme guaranteed by the federal budget.

Add new comment