The Financial Advice Association has argued against the extension of a record-keeping class order for advisers, making the case it’s out of date and ramping up the cost of advice.
ASIC announced in August a proposal to extend the operation of legislative instruments covering the reportable situations regime (otherwise known as breach reporting) and record-keeping requirements for advisers.
In a submission to ASIC consultation, the FAAA argued Class Order 14/923, which governs record-keeping requirements for advisers, generates a high level of compliance activity and effort, and has increased the cost of providing advice.
“The FAAA have for a long time advocated for greater regulatory capacity for financial advisers to rely upon their professional judgement, rather than the type of prescriptive record-keeping obligations that are set out in this class order,” the submission said.
“This view is consistent with the values and standards in the Code of Ethics and has also been reflected in the deliberations with respect to the Quality of Advice Review and the Government’s Delivering Better Financial Outcomes reforms.
“Whilst the FAAA supports the importance of appropriate record keeping, this needs to be based upon a sensible consideration of the costs of record keeping.”
The association also flagged issues with how the regulation works in the case of a licensee going into administration or liquidation, or in a situation where an authorised representative dies.
“It would seem to be appropriate to have some discussion within the class order on how these obligations can be transferred to another business or licensee,” the submission said.
“The continuation of these record keeping obligations beyond the closure of these businesses or the death of an individual, in the absence of an obvious alternative solution, is quite problematic.”
The submission also noted that anticipated legislative changes from the Delivering Better Financial Outcomes reforms for the removal of the Safe Harbour Steps will further impact the requirements.
“This class order is now 10 years old, and during this time there have been a number of changes to the Corporations Act providing the opportunity for the substance of this class order to be built into the law,” the submission said.
However, the association backed the extension of ASIC Instrument 2021/71, which covers breach reporting requirements.
The instrument was introduced by the government and regulator to put measures in place prevent the need trivial matters from being reported.
The association supported extending the instrument because the current breach reporting law is too broad and would capture matters “not worthy” of being self-reported to ASIC or consuming the regulator’s enforcement resources.
“The provision with respect to reporting a matter subsequent to a previously reported matter within 90 days, rather than 30 days, is appropriate, and should reduce additional unnecessary effort and cost, particularly for a matter that is subject to further emerging cases or is the result of a problem that is difficult to fix immediately,” the submission said.
Breach reporting came into effect in October 2021 and since then the regulator has been critical of under reporting of breaches from the industry, particularly smaller licensees.
