While the Financial Services and Credit Panel (FSCP) can take action on individual advisers’ misconduct, a compliance professional unpacks why the panel does not subject licensees to further action.
The FSCP is a pool of industry participants, appointed by the responsible minister, that ASIC draws upon when forming individual sitting panels. It operates separately from, but alongside, ASIC’s existing administrative decision-making processes.
Last month, Money Management probed into issues that occur the most and what actions the panel takes as a result of the breaches.
Sean Graham, managing director of compliance service provider Assured Support, shed further light on how the FSCP operates in regard to advice licensees.
While the authority predominantly focuses on the misconduct of individual advisers, Graham unpacked why it seems to “ignore” the role of licensees in these failures.
According to the ASIC Regulatory Guide 263, the FSCP has the authority to take a range of actions in response to alleged misconduct. This could include further training, supervision or reporting.
“The panel can also suspend, ban and reprimand advisers and refer matters to ASIC. However, it’s important to understand that the panel can only consider and make decisions on matters that pertain to a ‘relevant provider’,” Graham wrote.
“However, this doesn’t entirely explain why licensees were not subject to further ASIC action in these cases. The FSCP may not have the authority to investigate or monitor licensees, but ASIC does. So why are there no complementary media releases focusing on the licensees or their compliance arrangements?” he questioned.
There are several reasons why the FSCP takes action against an individual rather than a licensee, according to Graham:
Licensees’ remedial actions
In certain cases, ASIC will have considered the remedial actions taken by a licensee to address the adviser’s misconduct, such as implementing additional compliance measures.
The corporate regulator may then decide no further investigation is necessary if the licensee has demonstrated an adequate response to the misconduct.
Isolated incidents
Some cases of misconduct may be deemed by ASIC as an isolated or one-off failure, rather than a systemic problem. In these circumstances, ASIC could determine the ASFL’s existing compliance system as “generally sufficient” and would not take further action.
Insufficient evidence
Insufficient evidence leading to no action occurred in three instances out of the FSCP’s 16 outcomes, equating to nearly one-fifth of all cases.
“In some cases, there may need to be more evidence to establish that the licensee failed in its supervisory or compliance obligations, even if an adviser engaged in misconduct, and there may be no compelling reason to investigate further.”
Accountability
ASIC and the FSCP may also decide that the adviser’s misconduct was primarily attributable to the individual’s own actions, rather than failures of the licensee, meaning no further action is needed in regard to the AFSL.
Proportionality
“ASIC may have considered the proportionality of taking action against the licensees, weighing the severity of the adviser’s misconduct against the potential impact on the licensee’s business operations and other advisers within the firm who were not involved in the misconduct,” Graham explained.
Ongoing monitoring
A final reason the FSCP takes no action with licensees is because it relies on ASIC’s ongoing supervision of licensees to improve its compliance frameworks.
With these potential reasons in mind, Graham noted the absence of public action against licensees does not mean they are never held accountable.
“Although some commentators criticise the FSCP for their inconsistencies, a more considered assessment might lead one to the realisation that the FSCP considers matters in context and takes a risk-based approach to compliance failures.”
