Licensee record-keeping key to confining remediation inside 7 years
Financial planning firms should not have to remediate clients by standards that did not exist at the time that alleged poor conduct occurred.
That is the assessment of the Australian Securities and Investments Commission which has nonetheless made clear that licensees would be well advised to have their systems well in place to ensure they can defend this position.
Answering questions on notice from a Parliamentary Committee, ASIC said: “We do not expect licensees to assess and remediate conduct by reference to standards that did not exist at the time”.
However, it made clear that much or the ultimate risk for how legacy complaints were handled was to be carried by the licensee, stating: “This is a matter for the licensee to consider when turning their mind to whether a remediation is warranted”.
ASIC told Queensland Liberal back-bencher, Bert Van Mannen that its current consultation paper (CP 335 was seeking “feedback about whether our guidance in RG 256 should be revised so that the review period commences on the date a licensee reasonably suspects the failure first caused loss to a consumer”, noting that, “currently RG 256, which was drafted primarily to apply to financial advice reviews, states that ASIC will generally not expect licensees to review advice going back more than seven years, although this will depend on the context and circumstances of the advice relationship”.
“If licensees have proper governance and risk management frameworks in place, then review periods for remediations should rarely exceed seven years. If a licensee’s poor systems and governance frameworks result in delays to the identification of failures, it may not be efficient, honest and fair to rely on the late identification to limit the scope of consumers in a remediation,” the ASIC answer said.
“We do not expect licensees to assess and remediate conduct by reference to standards that did not exist at the time. This is a matter for the licensee to consider when turning their mind to whether a remediation is warranted.”
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