Licensees would need to contact the clients of miscreant financial advisers to advise them of wrongdoing under the recommendations of a Parliamentary Committee tabled in Parliament today.
The House of Representatives Standing Committee on Economics Review of the Four Major Banks has also recommended the replacement of the financial services external dispute resolution (EDR) bodies with a single Banking and Financial Sector Tribunal by 1 July, next year, to be funded by the financial services sector.
The committee's review was aimed at the major banks, but the recommendations contained in its report have serious implications for the broader financial planning industry.
Where financial planning is concerned, the committee has recommended extended powers for the Australian Securities and Investments Commission (ASIC) including an annual public reporting regime for the wealth management industry to provide detail on the overall quality of the financial advice industry and misconduct in the provision of financial advice by licensees or their representatives.
The committee has also recommended that ASIC report the information on an industry and individual service provider basis.
It said that it was also recommending that, "whenever an Australian Financial Services Licence (AFSL) holder becomes aware that a financial advisor (either employed by, or acting as a representative for that licence holder) has breached their legal their legal obligations, that AFSL holder be required to contact each of the financial adviser's clients to advise them of the breach.
The committee's report will now be considered by the Government but is unlikely to find its way into legislation much before the middle of next year.