Advisers suspected of a breach that falls within one of six broad categories will be referred to an industry panel led by ASIC according to draft legislation released by the government this week.
After deciding in 2019 against an industry-led monitoring solution, the government settled on legislation that would see ASIC’s Financial Services and Credit Panel (FSCP) assess possible breaches in hearings populated by one ASIC staff member and at least two industry participants.
A new annual registration system for advisers will be in effect from 1 January 2022 according to the Single Disciplinary Body for Financial Advisers draft bill, with licensees responsible for registering their authorised representatives before 1 January 2023.
The cost for registration will be announced at a later date, Treasury stated.
The FSCP will take on an expanded role as the new Single Disciplinary Body, Treasury advised. The panel currently assists ASIC on “more bespoke banning matters”, but will now take care of less serious breaches that don’t warrant possible banning orders from ASIC.
Treasury outlines six of these broad circumstances, including when an adviser’s ability to practice is compromised or when a financial services law – including the Code of Ethics – has been broken.
Other scenarios highlighted are advisers becoming involved in breaches by others, as well as advisers operating while unregistered or ignoring rulings made by the FSCP or AFCA.
The FSCP will have a range of sanctions to apply including additional training and the suspension or cancelling of an adviser’s registration, which would effectively cancel and adviser’s ability to practice. The FSCP can also hand out its own infringement notices or recommend ASIC undertake civil penalties.
Advisers will be given 28 days to appeal any sanctions and can enlist the services of a lawyer or colleague – at their own expense.
Details of any disciplinary action taken against an adviser may be posted on ASIC’s Financial Adviser Register.
Notably, the draft legislation also brings financial advisers who provide tax (financial) advice services into the fold; these providers will come under the FSCP’s purview and no longer need to be registered under the Tax Agent Services Act 2009.
As expected, the Financial Adviser Standards and Ethics Authority will be disbanded on 1 January 2022, with responsibilities tied to its ethics and education settings being transferred to Treasury.
Panel under question
The “industry participants” that will adjudicate on the FSCP’s panels will likely come under increased focus as advisers debate the single disciplinary body plan.
Little is known about the pool of industry participants ASIC draws upon when forming individual panels, other than their historical role helping the regulator on misconduct investigations that have “significance, complexity or novelty”.
The original FSCP was formed in 2017 with 18 members, the most notable being ex-AFA chief executive Brad Fox and former Boutique Financial Planners head Dacian Moses. According to ASIC’s website only 16 FSCP members remain.
The regulator may itself be short on information about panel members. After almost five years a note on the relevant web page says: “Background information on members will be provided shortly.”
According to ASIC panel members have to this point gotten onto the FSCP by expressing an interest to the regulator. This may change, however, as the draft legislation states “ASIC must select from a list of eligible persons appointed by the Minister”.
“The list of eligible persons could include representatives from the financial services industry, such as financial advisers and financial services licensees, as well as people with experience in other fields, such as law, economics, accounting and tax,” the draft’s explanatory memorandum states.
Questions remain whether the cohort of 16 will be sufficient to tackle the FSCP’s new expanded role. According to ASIC’s H2 2020 enforcement update 13 of the 37 enforcement results for the 6-month period were related to financial advice misconduct, while 21 of the 61 enforcement litigations that were in progress related to financial planning.
A short consultation period for the draft legislation has been set, with Treasury accepting submissions until May 14.
