Advice firms should resist any attempts by ASIC to force them to accept remediation outcomes that involve them trading away hard-fought monetary limits through external dispute resolution schemes such as FOS, according to imac legal & compliance Principal Lawyer Ian McDermott.
“We understand ASIC is getting close to releasing its regulatory guidance on advice review and remediation programs. ASIC’s media release on this issue in May 2015 suggested that “licensees may be required to waive any time limit, monetary or other limits that might constrain the EDR scheme’s jurisdiction”, Mr McDermott said.
“But trading away monetary and other limits should not be supported in our view” he said.
“We have every sympathy for innocent people who have lost money as a result of poor advice or other conduct and it is important for them to have legal recourse to compensation where the wrong thing has been done. But it is going too far to expect advice firms to have a blank cheque awaiting the outcome of an EDR determination.
“EDRs are not courts. They do not have the same standards of evidence, rigorous analysis, reasoning and procedure as courts and the EDRs are not bound by the precedence of their own decisions. What’s more, in agreeing to be a member of such schemes, AFS licensees also agree to be bound by the decisions of the EDR scheme and not to pursue any legal rights of appeal. In other words, licensees already trade away many of the legal rights that are the bedrock of our justice system in order to provide a cost-effective EDR solution for consumers.
“In those circumstances, it is not appropriate that AFS licensees should also waive monetary award and time limits. We recognise that in some instances clients have lost their life’s savings but such a regulatory outcome (i.e. no time or monetary limits) would rebalance the scales of justice too far.
“People also lose significant sums of money through real estate and other large purchases such as motor vehicles and the like. But you do not see open-ended monetary and time limitations in those areas. If you were to have limitless time and monetary outcomes, the first thing you would need is absolute faith in the EDR scheme and their processes.
“Of course, PI insurance could also be an issue for licensees too. The industry already has a dearth of PI insurers. PI insurers would either have to agree to waive time and monetary limits or licensees would have to carry the can themselves.
“imac legal encourages licensees to keep an eye out for ASIC’s proposed guidance on review and remediation and to provide their views to the regulator through the consultation process,” Mr McDermott concluded.
