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ASIC reiterates SMSF surveillances

The Australian Securities and Investments Commission (ASIC) has reminded the industry of its surveillance activities for SMSFs, including monitoring newly licensed accountants, shadow shopping and financial advice in larger institutions.

“In terms of surveillances, you may see us or you may not see us,” ASIC technical adviser to the deputy chairman Kate Metz told the CPA National SMSF Conference in Melbourne last week.

“We do two types of surveillances: productive surveillances are where we look at a theme [such as] going out and visiting accounting businesses to see how businesses are going with the new obligations under the new licensing regime.

“We will also be looking at pieces of advice that have been provided by businesses that have moved across to the licensing regime.

“We’ll also be looking at unlicensed activity. So they’re examples of thematic surveillance or proactive surveillance.”

ASIC also undertook reactive surveillances, the second type of industry monitoring, Metz said during the panel session.

“That is where we have market intelligence [informing us] that there could be a problem.
“It might be through CPA telling us that we need to have a look at this group or consumer complaints about a particular group.

“In that case, we will go out and have a look at the advice that’s been provided.

“The way our surveillances typically work in that type of situation is that after we see a sample of the advice that’s been provided to clients … we’ll ask to see additional material.”

ASIC commissioner Greg Tanzer opened the conference by announcing that over the next 12 months, the corporate regulator would conduct a range of surveillance activities on accountants.

“In particular, we are going to visit the small number of [licensed] accountants in each state to understand how they’re operating,” Tanzer said.

“We’re going to conduct targeted surveillance on some licensed accountants to assess whether they’re meeting their obligations and financial product advice in relation to SMSFs.

“We’re going to seek, in particular, to identify unlicensed conduct and to take appropriate action.”

During the panel session, Metz addressed ASIC shadow shopping in the financial services sector.

“There are a lot of myths that surround our shadow shopping and depending on who you ask, some people in the financial advice industry believe that we’re constantly shadow shopping, which is actually not the case,” she noted.

“It’s a consumer-driven exercise that we do very infrequently. We’ll do one every few years.

“At this stage, we are likely to do a shadow shop in the next year. We haven’t worked out what our focus area will be, but once we have we will let everybody know, so we don’t do these exercises in secret, we always announce it to the marketplace and explain what it is we’re looking at.”

In addition, she provided a response to industry concerns about problem advisers and breaches of the best interest duty.

“We have two large pieces of work at the moment, which are focusing on the larger financial institutions – one of those pieces of work is looking at what we call ‘bad apple advisers’, so how big financial institutions deal with problem advisers,” she said.

“One of the concerns that we have is that problem advisers, once recognised and terminated [by the institution], tend to turn up in another planning institution, so as part of that work we are looking at review and remediation of clients, and the appropriate reference checking process that occurs.”

ASIC is also working on a separate project that will look at whether conflicts of interest are an issue in vertically integrated firms.

“I think we’ll be much more active in that space [of bad apple advisers] and people have had time now since the Future of Financial Advice was passed, so we are very serious about people getting it right, and where it’s appropriate to use we will take penalty actions,” Metz added.

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