Tell us how advisers will be affected, demands AFA
The Association of Financial Advisers (AFA) has cautioned the Australian Securities and Investments Commission (ASIC) on the manner in which it uses its product intervention powers, particularly in circumstances where it only suspects consumer detriment might occur.
The AFA has expressed concerns about the manner in which advisers will be exposed to the power and the possible unintended consequences which might be inflicted on both advisers and their clients.
“We continue to believe that there remains a lack of clarity with how this power may be used and with whom it may be used upon,” the AFA said. “From a financial adviser perspective, to what extent does this power allow ASIC to take action against a party who is providing financial advice with respect to a product that might be the subject of a Product Intervention Order?”
“Identifying detriment that has not yet occurred and identifying products and individuals involved in this, may cause unnecessary panic and contribute to the crystallisation of actual losses,” the AFA warned in a submission filed with ASIC this month.
“It is important to be conscious that as soon as a product is subject to a potential product intervention order then it will most probably be removed from virtually all advice licensees’ approved product lists (APLs),” it said.
“This will turn off new business flows, including any new business that is currently in the process of being finalised. We believe that this needs to be considered very carefully in circumstances where only a potential detriment is identified or is likely to occur,” the AFA submission said.
The AFA submission said the organisation was supportive of the ability for ASIC to undertake product intervention, provided it was done in a careful and considered fashion that took into account the risk of increasing the extent of detriment for existing clients.
“We believe that there is a need of greater clarity with respect to how this power will be implemented, the nature of such intervention orders and the parties that might be impacted,” the submission said.
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