The Australian Securities and Investments Commission (ASIC) effectively increased its powers as a result of the Future of Financial Advice (FOFA) reforms through a relaxed burden of proof standard that can be used to justify the banning of a financial adviser.
“Before the FOFA reforms there was a section in ASIC’s powers that said the regulator could never ban you or get rid of you unless it believed you would never contravene the financial services laws again,” Alexis Compliance and Risk Solutions founding director Christina Kalantzis told the selfmanagedsuper SMSF Professionals Day 2017 in Brisbane yesterday.
“Now the word has changed to ‘likely’. So now if ASIC suspects that you are likely to contravene a financial services law, it can ban you.
“So the actual burden of proof has changed completely. To say that someone would never do it again is a pretty high standard. Now it’s ‘likely’.”
Kalantzis said a larger number of financial advisers had been banned since 2014, shortly after the FOFA reforms were introduced as legislation.
In addition, she alerted advice providers to the fact the nature of enforceable undertakings (EU) issued by ASIC had changed in nature.
Historically, an EU resulted in an adviser installing an external compliance person to review their advice for a year, she said.
However, some EUs the corporate regulator is now issuing contain conditions whereby the adviser agrees to exit the industry for a period of say three years, she noted.
“I call that a banning. It certainly looks like and feels like a banning,” she said.
In light of this development, she suggested all EUs be properly reviewed and negotiated because once the terms are accepted, there will be no further recourse available to the adviser in question.
