Snippets from the RC Interim Report: [Part 1: pg 149] ASIC’s...

Snippets from the RC Interim Report:

[Part 1: pg 149]
ASIC’s emphasis on the use of banning orders invited attention to a more basic issue about regulatory structure. Should advisers be individually licensed? As noted earlier, the present regulatory structure permits holders of a financial services licence to authorise a person to provide a specified financial service or services on behalf of the licensee.318 The licensee must notify ASIC of the authorisation.319 As between the licensee and the client, the licensee is responsible for the conduct of an authorised representative,320 and that responsibility extends to loss or damage suffered by the client.321 What is gained by having this structure? Would there be advantage in providing for the licensing of authorised representatives, thus bringing them under the direct supervision of ASIC?

[Part 1: pg 151]
In my view, however, ASIC’s enforcement of the law with regard to individual advisers is an important part of the disciplinary system. It is for that reason that a robust approach to enforcement is critical.

[Part 1: pg 153]
Second, licensees and ASIC are not sufficiently sharing information about advisers. Licensees may fail to report, or report late, their concerns about an adviser’s conduct, which obviously impedes ASIC’s ability to enforce disciplinary sanctions on those that have breached the law. That is so even though, as Mr Hagger of NAB noted, licensees themselves depend on ASIC’s Financial Adviser Register for a definitive listing of banned advisers to indicate whether an adviser has a poor history.337 ASIC, however, noted that it ‘rarely if ever’ uses its power under Section 916G of the Corporations Act to disclose information about an adviser to a licensee.338 The licensee may therefore lack information necessary for it to determine how to supervise or monitor the adviser properly.

When the amended regulatory provisions come into effect, all advisers will be required to become members of a code monitoring body. Advisers will be prohibited from changing associations while under investigation by a monitoring body, and all breaches of the code will have to be reported to ASIC and the adviser’s licensee. Breaches of the code and any sanctions will be listed on the Financial Adviser Register.3

In these ways, the new scheme will deal directly with several of the issues raised above. The requirement to share information is welcome. The restriction on advisers changing schemes mid-investigation should limit the evasion of disciplinary processes that is otherwise possible in a system where multiple bodies administer one code of ethics. However, advisers not under investigation but looking for a lighter touch will still be free to switch monitoring bodies. The consistency between various code monitoring bodies in enforcing discipline will therefore be important.


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Seems to me that dodgy advisers will not be able to jump ship (positive for CAF).

Seems to me dodgy advisers will bear liabilities (positive for CAF).

Seems to me it will be more difficult for dodgy advisers to hide (positive for CAF).

There is a chance ASIC will licence ARs (negative for CAF in terms of revenue opportunity, but positive in terms of less penalties).