Licensees are at risk of civil and criminal penalties under proposed experience pathway legislation if they can’t accurately verify an adviser’s history.

The Minister for Financial Services Stephen Jones announced the draft legislation for the education carve-out a month ago and licensees, as well as advisers, could face criminal and/or civil penalties for giving false or misleading information.

Insignia Financial head of professional standards John Corcoran says there’s a conflict of interest when it comes to relying on adviser information that licensees may not be able to verify.

“Because there’s a conflict that exists on the adviser’s side – given the connection to not having to complete further study and the time and cost savings that would represent to them – there’s potential for them to provide false or misleading information to the licensee,” Corcoran says.

He adds licensees would likely be more comfortable with a statutory declaration given by the adviser due to the risk faced by licensees.

“There would be a qualified defence for the licensee if they had no reason to believe the information they reported on the [ASIC Financial Adviser Register] was false or misleading,” Corcoran says.

Corcoran pointed to an adviser banned in March for falsifying his adviser exam result as an example of the difficulty for verifying information.

Sydney-based adviser Todd Karamian altered his certificate from a ‘fail’ result to a ‘pass’ result and sent the altered certificate to his licensee, Bluepoint Consulting, which then provided the certificate to ASIC.

Karamian had been providing financial advice for just over nine months from the 2021 FASEA exam deadline.

Corcoran says the risk of having an adviser mislead a licensee creates further potential consequences.

“If that individual was authorised when they were not eligible, then would a PI insurer respond to any claim for advice that was provided by that individual during that period?” Corcoran says.

“If you had asked me a few months ago whether I thought that there was a risk here, I probably would have had a slightly different opinion to what I have today.”

Conrad Gilbert, professionalism and ethics adviser at Diverger-owned Knowledge Shop, says the issues come down to being able to demonstrate “relevant experience”, which isn’t necessarily a simple task.

“Even now [licensees] need to start thinking about this because they could have some advisers that are authorised to them that they would think would meet the experience pathway,” Gilbert says.