Licensees face stronger obligations to notify clients of bad advice
Financial planning licensees will be under a specific obligation to notify clients of suspected misconduct by financial advisers when it actually comes to their attention.
That is one of the key changes to the Corporations Act being pursued by the Federal Government in response to the Hayne Royal Commission and contained in exposure draft legislation released by the Treasurer, Josh Frydenberg.
It makes clear that when a licensee detects misconduct, it is required to inform potentially affected clients within 30 days and to investigate the nature and full extent of any misconduct within a reasonable amount of time.
As well, once an investigation is complete, the licensee will need to inform affected clients within 10 days of the full extent of the misconduct and remediate them for their loss within 30 days.
Importantly, if licensees fail to live up to these obligations then they will leave themselves open to not just civil penalties but also criminal penalties.
The explanatory documentation accompanying the proposed new legislation makes clear that licensees need to act where “there are reasonable ground for the licensee to believe that a reportable situation has arisen and either that reportable situation amounts to a significant breach of a core obligation, or it amounts to gross negligence, serious fraud and other circumstances prescribed by the regulations.
It said the person that had to be notified was the affected client and such notification allowed clients to consider their rights and the ways they could mitigate potential loss or damage.
Recommended for you
AZ NGA has entered into a strategic partnership with national advice firm MiQ Private Wealth, as a way to provide a succession solution, as well as career development opportunities for staff.
While the advice profession struggles under growing operating costs, Adviser Ratings has found more than half of practices – some 58 per cent – that generate less than $250,000 in revenue report no profit at all.
The Federal Court has ordered the freezing of assets and the appointment of receivers to two entities linked to Australian Fiduciaries, ASIC’s latest move in an ongoing investigation into the company’s managed investment schemes.
Off the back of the August adviser exam results, the profession has seen 17 new entrants hit the Financial Adviser Register (FAR) this week, helping numbers return to positive territory.
