ASIC guidance on AFSL review and remediation programs

ASIC Consultation Paper 247 Client review and remediation programs and update to record-keeping requirements (CP 247) sets out ASIC’s proposed guidance on AFSL review and remediation programs conducted by Australian financial services licensees who provide personal advice to retail clients.

The consultation paper contains proposals based on ASIC’s learnings in dealing with review and remediation programs in recent years.

Generally, a review and remediation program is a project set up within an advice licensee to review personal advice, where a systemic issue in relation to the advice has been identified, and then to remediate those clients who have suffered loss as a result.

ASIC defines a ‘systemic issue’ as an issue that may have implications beyond the immediate rights of the parties to a complaint or dispute, or that may have implications for more than one client.

A review and remediation program can be a large-scale exercise, where the advice licensee sets up a separate project team and recruits additional staff, or it can be a small-scale project operated by existing staff and resources. The aim of the program is to place affected clients in the position they would have been in had the misconduct not occurred.

The proposed guidance aims to:
(a) improve outcomes for consumers;
(b) provide a streamlined and well-understood review and remediation framework; and
(c) set out the key principles against which ASIC will assess whether a review and remediation program is operating efficiently, honestly and fairly, in line with the general AFS licensee obligations.

ASIC says that the principles in the proposed guidance should be applied to review and remediation programs in areas such as superannuation or credit, or programs are conducted by advice licensees not relating to personal advice, to the extent relevant.

Review and remediation programs will generally follow the same steps:
(a) determining who are the potentially affected clients;
(b) designing and implementing the program;
(c) communicating with clients; and
(d) providing for external review if the client is not satisfied with the operation of the program or the result.

Key principles

Establishing a program: Advice licensees should consider a range of factors, including whether the nature of the misconduct warrants the establishment of a program, who to engage with as part of the process, and how a program will interact with other AFS licensee obligations. A review and remediation program is more likely to be appropriate where a systemic issue has occurred that may have caused a loss to the affected clients. Not all systemic issues will require a review and remediation program.

Scope of the program: The scope of a review and remediation program will often depend on the type of misconduct, the size and structure of the advice licensee, and the size of the licensee’s client base. The scope of a review and remediation program should be determined in a way that ensures it covers the right advisers, the right clients and the right timeframe.

Design and implementation of the program: The process of review and remediation needs to be comprehensive, timely, fair, and transparent. There should be clearly defined principles to guide the process and an appropriate governance structure (including appropriate involvement at a senior management level). The process should be simple for the client. All review and remediation programs should have some level of independent oversight in developing and operating the program.

Communicating with clients: Effective, timely and targeted communication is key to ensuring that clients understand the review and remediation program and how it will affect them. Advice licensees should proactively contact potentially affected clients, and consider the best way to do this in light of their client base and appropriate methods of communication.

External review of decisions: It is important that clients have access to an advice licensee’s external dispute resolution (EDR) scheme if they are not satisfied with an aspect of the review and remediation program or the decision of the licensee about whether misconduct has occurred and remediation is appropriate. Advice licensees should engage with their EDR scheme when establishing a review and remediation program so that relevant documentation, timelines and other arrangements are agreed upfront between the licensee and its EDR scheme. Where appropriate, advice licensees should offer assistance to clients who wish to seek their own professional advice to assist their response to a review and remediation program. Settlement deeds should also not restrict a client’s ability to speak to ASIC (or other Commonwealth, state or territory agencies), an EDR scheme, an adviser’s professional association or legal representation about a matter if the client has concerns, for example, about the operation of a review and remediation program, or the way in which their matter has been reviewed.

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