ASIC review identifies licensees' remediation problems
ASIC has warned advice licensees face regulatory action if they fail to remediate customers in a timely manner.
Over the last seven years, ASIC has overseen more than $7 billion of remediation to an estimated 8.4 million Australian consumers for failures identified across the financial services industry.
The regulator's comments follow a review of the remediation policies and procedures of some large financial institutions to assess their implementation of Regulatory Guide 277 (RG277) which was written in September 2022.
The review identified gaps where some licensees’ policies and procedures were inconsistent with RG 277 and could lead to poor outcomes for customers.
Examples of problems included:
- Some policies that could inappropriately narrow the scope of remediation review periods such as the inclusion of unnecessary approval processes in order for review periods to exceed a certain number of years.
- Licensees did not always consider beneficial assumptions as a mechanism to enable efficient remediations.
- Some licensees had pre-determined rates for specific products or scenarios. It was not always clear that these were subject to adequate review and controls to ensure that they were appropriate in the circumstances.
- A general lack of focus on fairness in governance frameworks.
ASIC reminded licensees that regulatory action could include enforcement action, issuing public statements, general monitoring of the remediation process, requests for regular reporting and reviews of the licensee's design and conduct of the remediation.
ASIC deputy chair, Karen Chester, said: “RG 277 provides licensees the guidance they need to get remediation right. Licensees need to be proactive, timely and fair in their approach to consumer remediation.
“Effective remediation starts with robust, consumer-centred policies and procedures, which give licensees and their staff the confidence and ability to fully investigate the issue, triangulate the data available, discover the true root cause and scope of the problem, and respond effectively.
“Getting remediation wrong is very costly – costly to consumers who bear the burden of a financial firm’s mistakes, but also very costly for firms who have to re-do remediations and repair reputational damage.
“Going forward, while ASIC will generally not oversee remediation programs, we will consider regulatory action where licensees fail to deliver fair and timely remediation to affected consumers.”
AUTHOR
Laura Dew
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
