No SOA? ASIC says you’ll pay

By Ross Kelly

THE chair of the AustralianSecurities and InvestmentsCommission (ASIC), Jeffrey Lucy, has issued a warning to financial planners that if they fail to comply with choice of fund legislation they face harsh punishment.

The warning came during a speech Lucy recently gave to the Committee for Economic Development in Sydney.

Lucy said advisers who did not provide clients with a statement of advice (SOA) would be specifically targeted, despite acknowledging the Federal Government was in the process of changing the SOA rules because they were proving too onerous for advisers.

“...where there are new provisions and if people are making a genuine attempt to comply, we will be balanced in our approach,” Lucy said.

“Where the provisions are not new, where the legislature has deliberately imposed strict liability, or where people are disregarding the law, we will adopt our usual strong approach to enforcement.”

“Not providing an SOA is clearly in the latter category.”

Lucy’s warning about a crackdown on SOA compliance comes just weeks after the corporate watchdog’s controversial prosecution of Hobart-based adviser Brendan Moore, who failed to give four clients SOAs, even though the clients experienced no financial loss and still expressed happiness with the adviser’s services.

“SOAs are a primary consumer protection tool under FSRA and all the more relevant where switching of super is concerned because of the long-term implications of a switching decision and the important provisions covering the costs and benefits of switching someone’s retirement savings,” Lucy said.

The warning also follows further reassurance from Parliamentary Secretary to the Treasurer Chris Pearce that changes to the SOA rules were imminent.

In a speech to a Credit Union Services Corporation forum in Sydney he said that a series of proposed refinements to FSR legislation, including a possible shortening of the length of SOAs, would be made public “in the near future”.

Lucy also backed ASIC’s controversial second shadow shopping exercise, which he said would begin “around the start of super choice in July”.

“The shadow shopping technique gives strong insights into the consumer’s real life experience of getting advice, and we will be seeking to check whether the financial advice they receive complies with the law, including whether advisers have met their legal obligations related to switching.”