ASIC reports on oversight of financial advisers

ASIC has released REP 515 Financial advice: Review of how large institutions oversee their advisers which sets out its the findings of its review of how Australia’s largest financial advice firms have dealt with past poor advice and non-compliant advisers, including how these firms have dealt with affected customers.

The review focusses on the conduct of the financial advice arms of AMP, ANZ, CBA, NAB and Westpac.

The review looked at:

  • how the firms identified and dealt with non-compliant conduct by their advisers between 1 January 2009 and 30 June 2015;
  • the development and implementation by the firms of large-scale review and remediation frameworks to remediate customers impacted by non-compliant advice, and
  • the processes used to monitor and supervise the firms’ advisers, focussing on background and reference-checking, the adviser audit process and use of data analytics.

As of 31 December 2016, ASIC had banned 26 advisers identified in the review who demonstrated serious compliance concerns, and has ongoing investigations or surveillance activities in relation to others.

A total of approximately $30 million has been paid to 1,347 customers who suffered loss or detriment as a result of non-compliant conduct by advisers during the period of this review. (This amount is in addition to the compensation being paid by the institutions as part of the ‘fee for no service’ compensation payments set out in Report 499 Financial advice: Fees for no service.

ASIC identified a number of areas of concern where further improvements need to be made, including:

  • failure to notify ASIC about serious non-compliance concerns regarding adviser conduct;
  • significant delays between the institution first becoming aware of the misconduct and reporting it to ASIC;
  • inadequate background and reference-checking processes, and
  • inadequate audit processes to assess whether the advice complied with the ‘best interest’ duty and other obligations.

The report includes a number of checklists for all advice licensees:

  • background and reference checks before appointing a new adviser (refer Appendix 2);
  • auditing advisers to assess their compliance with the best interests duty and related obligations when providing personal advice (refer Appendix 3), and
  • Key Risk Indicators to identify high-risk advisers (refer Appendix 4).
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