The Association of Financial Advisers (AFA) has directly challenged the Federal Government to explain why financial advisers and mortgage brokers have been targeted in the wake of the Royal Commission rather than the major institutions.
In a submission filed with the Federal Treasury, the AFA has supported strengthening the breach reporting regime, but questioned why advisers and brokers have been targeted while others appear to have been let off the hook.
In doing so, the AFA has recommended that mandatory reference checking should be extended to other roles in the financial services sector, including within product providers, super fund trustees and also the management roles in financial advice licensees.
The AFA also expressed strong concern over proposals to impose an obligation to breach report advisers working for other licensees and suggested that rather than making such an approach mandatory, it should be made voluntary via a direct contact line with the Australian Securities and Investments Commission.
The submission said the AFA was concerned that the Government’s legislation was unreasonably focused on financial advisers and mortgage brokers when mandatory reference checking could and should apply more broadly.
“Why is it only being implemented for financial advisers and mortgage brokers? If the reporting of people from another licensee is a good idea, then why has it not been extended to reporting other entities that are suspected of breaching ‘core obligations’? This reflects a common view that the Royal Commission identified issues at the institutional level,” the submission said. “However, the regulatory response is focussed at the individual level.”
“There are many expressing the view that this was not the outcome that was expected nor the outcome that should have eventuated from the Royal Commission. We also question some of the penalties that have been proposed for a failure to comply with these new obligations. In our view it seems remarkable that you could go to jail for failing to report a suspected breach by a financial adviser from another licensee.”
It was in these circumstances that the AFA said it believed that it was appropriate to extend mandatory reference checking to other roles in the financial services sector, including within product providers, super fund trustees and also management roles in financial advice licensees.
