Advisers need to avoid regulator 'radar'
Advisers need to make sure their new regulatory requirements are all in place to avoid being on the regulator’s “radar”, according to risk and compliance firm Assured Support.
Speaking on an Association of Financial Advisers (AFA) webinar, Sean Graham, Assured Support managing director, said there was range of ways advisers could get on the regulator’s radar and advisers needed to manage their regulatory risk.
“You can’t control every aspect of the compliance process, that’s going to rest with your licensee,” Graham said.
“But what it does mean, if you’re an adviser and an authorised representative of a licensee, you have to understand how this works from day one because of the consequences of getting it wrong.”
Graham said advisers and licensees could not just “wait and see what happens” because of the way all the new regulatory changes came together.
“Every adviser knows 1 October there’s a new breach regime and reference checking system, on 5 October complaints comes in and design and distribution obligations (DDO) come in as well,” Graham said.
“The way these four regulations work together is they create mandatory reporting to the regulator, in terms of DDO, in terms of breaches, complaints and reference checking.
“At every mandatory report, the adviser or the authorised representative is identified as well; like it or not, we’re in a regime where the regulator is going to be getting a lot more data about us now.”
Graham said it was important to be aware of breaches or contraventions of the law that were deemed significant and needed to be reported to the regulator.
“One of those breaches that are deemed significant are failures of core licensee obligations and one of those obligations is to have an effective complaints internal dispute resolution (IDR) system,” Graham said.
“If you don’t have an effective IDR system from 1 October, that’s an issue that can be deemed a significant breach.
“The first enforceable rule under RG 271 says that in order for your IDR arrangements to be adequate, you have to have a dispute resolution system that meets the Australian Securities and Investments Commission’s (ASIC’s) standards and requirements.
“Even if you don’t get a lot of complaints – even if you’ve never received a complaint – you still have to have your arrangements in place by 1 October.”
Financial advice only made up a fraction of the total complaints received by the Australian Financial Complaints Authority (AFCA).
“Based on AFCA data, only 1.4% of complaints last year were about financial advice, the vast majority were about insurers and [product] manufacturers, and whatever else,” Graham said.
“It seems a bit of a disconnect these types of requirements are being pushed out to licensees and advisers when they’re not necessarily represented in the data.
“It’s a legacy issue, we went through a Royal Commission where a lot was flagged but those issues were institutional/structural issues which are no longer here.
“We are in some respects over-regulated, there is a level of regulation driven by past failures which have already been addressed.”
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