AFA calls for greater consumer protection

TheAssociation of Financial Advisers(AFA) is seeking direction from Government, and in turn theAustralian Securities and Investments Commission, on guarantees to protect consumers in the event of licensees having their licences suspended or cancelled under the Financial Services Reform Act (FSRA).

AFA president Robin Yates believes consumers are at risk in circumstances where ASIC suspends a licence, given licensees or authorised representatives are likely to have a number of incomplete client transactions on the go, many of which may be time sensitive.

“A decision by ASIC to suspend a licence (even if only done in extreme circumstances) has the potential to ruin the lives of clients and destroy the value of a representative's business,” Yates says.

Yates argues that ironically “the powers given to ASIC are so extreme that they have the potential to destroy the financial objectives of consumers at the stroke of a pen”.

Yates makes the analogy with the life insurance industry under the Life Insurance Amendment Act 1984 (LIAA) and the Insurance & Superannuation Commissioner (ISC) with regard to the administration of a particular life company.

“The LIAA gave powers to the ISC to appoint an administrator for judicial management of the company without necessarily winding up or suspending the business, [as] the winding up of a life company requires a court order… life agents working as representatives of a life company in those circumstances do not suddenly find themselves unable to work,” the AFA says.

Yates stresses that this is a far cry from the power granted under the FSRA to ASIC, which can suspend the licence of a licensee without having to apply to a court, although ASIC says this will only happen in extreme circumstances.