SDB should only focus on significant issues
With the cost of running an advice business continuing to increase, the Association of Financial Advisers (AFA) believes the proposed Single Disciplinary Body should only focus on significant issues as it is primarily concerned with the cost and complexity of running the body.
In its submission to the Financial Sector Reform (Hayne Royal Commission Response – a New Disciplinary System for Financial Advisers) Bill 2021, it said minor matters should not need to be reported to the Financial Services Credit Panel (FSCP) and matters of a more moderate nature should be dealt through an administrative process rather than a panel.
“We believe that there needs to be a sensible and efficient mechanism for matters to be triaged and that only significant matters should end up being reviewed as part of the panel process. Also FSCPs should be set up to consider multiple issues, and not just single matters,” it said.
“We note that it is proposed that Australian Securities and Investments Commission [ASIC] will triage all matters. We have reservations about the impact of this on the timing of the FSCP dealing with matters. We address this further in our recommendation that an FSCP secretariat be established, and they be the body responsible for triaging.”
The submission noted that the exposure draft legislation and the explanatory material was not clear on how all matters would be directed to ASIC.
“Whilst it is apparent how matters that result from consumer complaints to ASIC and breaches reported to ASIC will be captured by this regime, it is less obvious how other matters will flow through to ASIC,” the AFA said.
“For example, Australian Financial Complaints authority [AFCA] only pass on certain matters to ASIC at present, including those that are considered to be ‘systemic’. There is no current model for professional associations to pass matters on to ASIC. How will the flow of these matters be regulated? We believe that this needs to be explained and privacy issues with the passing on of personal information needs to be considered.”
AFA also said it was concerned that the funding of the disciplinary regime would implicate future ASIC funding levy amounts given the regime would be funded through the new adviser registration fee and an increase in the ASIC funding levy.
“It is concerning that there is no indication of what the impact is likely to be, however it would obviously be very substantial,” it said.
Recommended for you
A financial advice firm has been penalised $11 million in the Federal Court for providing ‘cookie cutter advice’ to its clients and breaching conflicted remuneration rules.
Insignia Financial has experienced total quarterly net outflows of $1.8 billion as a result of client rebalancing, while its multi-asset flows halved from the prior quarter.
Prime Financial is looking to shed its “sleeping giant” reputation with larger M&A transactions going forward, having agreed to acquire research firm Lincoln Indicators.
An affiliate of Pinnacle Investment Management has expanded its reach with a London office as the fund manager seeks to grow its overseas distribution into the UK and Europe.
