AFCA Consultation on draft Approach to complaints involving Financial Advisers and Managed Investment Schemes

AFCA is consulting on a draft investments and advice related Approach document: the AFCA Approach to determining compensation in complaints involving Financial Advisers and Managed Investment Schemes.

The AFCA Approach to determining compensation in complaints involving Financial Advisers and Managed Investment Schemes sets out how AFCA considers:

  • liability and compensation in relation to financial advice firms and Responsible Entities (REs) where the advice firm has provided advice on interests in a Managed Investment Scheme (MIS) including those MIS that have subsequently failed or become insolvent,
  • proportionate liability statutes in relation to complaints involving financial advisers and Managed Investment Schemes,
  • its powers to join a party to a complaint if the party is an AFCA member, and
  • fairness when apportioning loss in these complaints.

The new Approach document explains AFCA’s existing procedure and the principles it may have regard to – such as proportionate liability statutes – when making decisions, apportioning liability and awarding compensation for a loss in investment and advice complaints.

It will ensure that AFCA’s approach to these matters is consistently applied by case managers and decision makers.

AFCA can only consider complaints against financial firms that are members of AFCA. The complaint must also otherwise fall within AFCA’s jurisdiction. This requires that the complaint must arise from or relate to the provision of a financial service (as defined in the AFCA Rules) to the complainant.

Under AFCA’s Rules, it cannot consider issues relating to the management of a fund as a whole, or complaints merely about poorly or under-performing funds. This is the case for complaints involving either a MIS, or a financial advice firm, or both.

If AFCA assesses that a financial firm has breached its obligations to the complainant, it may decide that the financial firm must compensate a consumer for direct financial loss, indirect financial loss or non-financial loss. It may also decide that a financial firm is required to take, or refrain from taking, particular actions. If a consumer accepts AFCA’s decision, the financial firm is bound by that decision.

AFCA expects to publish its final Approach by early 2024.

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David Jacobson

Author: David Jacobson
Principal, Bright Corporate Law
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.

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