Phoebe Tapley

A possible move to upend the AFSL system by taking Chapter 7 out of the Corporations Act and individually registering advisers has received firm support across the industry yet been shut down by the Stockbrokers and Investment Advisers Association.

In Interim Report A of its Corporations Act review, the ALRC noted potential reforms to the definitions of ‘financial product advice’ and ‘financial service’ could “facilitate, though would not necessitate” more substantive changes to the regulation of financial advice such as individual licensing or registration of financial advisers.

The proposal received support from the CPA Australia, Chartered Accountants ANZ, the Financial Planning Association and the Institute of Public Accountants, but opposition from SIAA (still known as SAFAA at the time of the submission).

The FPA argued in its submission that licensee registration adds an additional layer of cost, oversight and influence over the financial planner in conflict with the professional standards under the code of ethics, while the IPA agreed that most licensing parameters can be covered under the code.

However, the SIAA submission stated if individual licensing is introduced any misconduct would be the responsibility of an individual, which will have no bearing on the reputation of others operating within an AFSL.

“There would therefore be no incentive for others to support a culture promoting ethical and law-abiding practices,” the submission stated. “Issues concerning the availability of PI insurance would also arise in the event individual licensing was introduced.”

The topic is expected to be covered at Professional Planner’s Licensee Summit on 6-7 June where ALRC president Hon. Justice Sarah Derrington will be speaking on the progress of the commission’s review.

Swirling discussion

ALRC senior legal officer Phoebe Tapley tells Professional Planner the technical change of separating the definition of personal advice and financial service could clear the way for future moves down the track of individual registration of advisers.

“That’s something during the consultation process we heard views on, some supportive but some who think that’s not the way to go.”

However, she noted the proposal didn’t receive a lot of submissions because it wasn’t a keen focus of the review.

“It was something we had noted because it does seem to be a discussion that’s swirling around that industry at the moment.”

Independent registration wasn’t alone in getting mixed reviews, with the proposal on the definition of financial product advice – one of the key findings of the first interim report – receiving concerns due to overlap from the concurrent Quality of Advice Review.

“We’ll be following the progress of that review and we have already started engaging discussions with the team who are conducting that review,” Tapley says.