Still issues with single disciplinary body legislation

The Financial Services and Credit Panel (FSCP) will only convene for serious issues, but there are still issues with the single disciplinary body (SDB) legislation according to the Association of Financial Advisers (AFA).

The Government released the draft legislation for the Better Advice Bill which also included an increased fee for the adviser exam, as well as the cost to register as a relevant provider.

In the draft, some of the circumstances Australian Securities and Investments Commission (ASIC) were required to convene a FSCP included:

  • The relevant provider became an insolvent under administration;
  • The relevant provider was convicted of fraud;
  • ASIC believed that the relevant provider was not a fit and proper person to provide personal advice to retail clients in relation to relevant financial products;
  • The relevant provider had at least twice been linked to a refusal or failure to give effect to a determination made by the Australian Financial Complaints Authority (AFCA) relating to a complaint;
  • If a relevant provider had not met the education and training standards;
  • If a relevant provider breached the requirements of a Statement of Advice as laid out in the Corporations Act; and
  • They were unregistered and provided advice.
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Phil Anderson, AFA general manager policy and professionalism, said the association was reasonably comfortable with the changes to the circumstances where the referral of a matter to an FSCP was mandatory.

“The inclusion of insolvency, conviction for fraud and not a fit and proper person were all expected and are completely reasonable,” Anderson said.

“The key driver of matters to be referred to an FSCP will be breaches of a financial services law where the breach is serious.

“In terms of what defines serious, we totally agree with the criteria about material loss or damage to a client and involves dishonesty or fraud.

“It appears that ‘material’ has not been defined, which adds a layer of complexity to this. We are unsure about the other criteria around a material benefit to the adviser, and how this would be assessed.”

However, Anderson said It should be noted that this regulation only defined which matters must be referred to an FSCP and that ASIC could still choose to refer other matters to the FSCP even if they were minor and administrative.

“Overall, this looks like an acceptable outcome with what must be referred to an FSCP, however we need to make the point that we still have issues with the SDB legislation, including the fact that ASIC are forced, when they reasonably believe that an adviser has breached a financial services law, and they choose not to refer a matter to an FSCP, that they must issue a written warning or reprimand,” Anderson said.

“We would like them to have the option to take no further action where the matter is minor or administrative. 

“The fact that they must issue a written warning, means that they will need to thoroughly investigate the matter and this will drive unnecessary costs, that will end up being charged back to advisers in the ASIC funding levy.”




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