Financial advisers might find themselves being judged on disciplinary matters by executives from the troubled timeshare sector after two executives from the country’s largest operator, Wyndham Vacation Clubs South Pacific, were named in the expanded Financial Services and Credit Panel (FSCP) pool.
The specialist nature of the pool and how it functions, however, should see the timeshare executives stick to disciplinary matters in their own sector.
The beefed up FSCP, which will function as the industry’s new Single Disciplinary Body (SDB), includes a representative mix of accountants, licensee executives, stockbrokers, risk and compliance specialists.
It also includes Wyndham non-executive director Gary Croker as well as Gary Toomey, who is a member of the timeshare operators compliance board.
The inclusions come depite ASIC having deep reservations about the timeshare sector. The regulator released updated guidance on timeshare schemes in December 2020 after saying it had “long been concerned” about the scope for consumer harm in 2019.
“Reports of misconduct cover a broad range of issues including pressure-selling practices, misleading and deceptive conduct, access to and use of accommodation, exit arrangements and responsible lending,” ASIC said, adding that it found “high levels of non-compliance with the best interest duty and related obligations”.
Timeshare schemes involve fractional ownership of holiday accommodation and are considered managed investment schemes, which puts them under ASIC’s purview and in the same regulatory bucket as financial advice.
The sector enjoys a more relaxed set of regulatory parameters than advice however, after Bill Shorten approved a carve-out from the ban on conflicted remuneration as part of the Future of Financial Advice reforms in 2013, mainly due to timeshares being sold as ‘lifestyle products’ that aren’t designed to generate a return on investment.
Horses for courses
The likelihood of timeshare operators on the FSCP adjudicating on financial advice breach hearings is slim, but it could happen.
In selecting the two representatives that will sit with an ASIC staff member on a panel, the regulator will “take into account the nature of each matter and the relevant expertise and experience of the available pool of FSCP members,” according to its 2017 guide on the FSCP.
Theoretically, there should be enough financial advice specialists on the panel so that advice hearings will be attended by advice representatives.
However, despite almost doubling the pool size to 31 members the FSCP has filters that could thin the ranks, in particular the requirement to sit out hearings where a conflicts of interest exists. The availability of pool members could also affect who sits on panels.
ASIC is due to put out an updated regualtory guide on the FSCP in its new guise, which should provide further clarity on its future operations.
