ASIC clarifies rule around ‘independent’
The Australian Securities and Investments Commission (ASIC) has obtained legal advice and clarified its position on the use of restricted terms relating to the independence of financial advisers.
The regulator now says that if a financial adviser does not receive any commissions or volume-based payments, or other gifts or benefits and has no conflicts of interest or influence from any product issuer, then they can describe themselves as being “independently owned”.
However, if the financial adviser does receive commissions or operates with conflicts of interest, then they will not be permitted to use the term “independently owned” or other like words or expressions.
Commenting on the clarified position, ASIC deputy chairman, Peter Kell said the independence of financial advisers was an important issue for consumers and investors, and might sway their decisions about their investments or their choice of adviser.
“Consumers must not be misled into believing that an adviser is independent and free from influence when that is not the case. This is why the Corporations Act puts strong conditions around the use of 'independent' and similar word and phrases,” he said.
Kell said ASIC acknowledged that there has been uncertainty in the financial advice industry about whether terms such as “independently-owned” and “non-aligned” were restricted terms under s923A and in light of that uncertainty, the regulator would provide a facilitative compliance period of six months so that advice firms that do not satisfy the conditions in s923A could change websites and documents to remove terms such as “independently owned”, “non-aligned” or “non-institutionally owned”.
The facilitative compliance period will not extend to contraventions of s923A where the specified restricted terms “independent”, “impartial”, and “unbiased” are used. ASIC considers that there has been no uncertainty about how s923A applies to these terms and ASIC will continue to take action against financial service providers for using these terms in breach of s923A.
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