ASIC, Regulation

RC calls for individual rego, new disciplinary body

Financial advisers should be separately registered with the Australian Securities and Investments Commission (ASIC) while also subject to a new single, central disciplinary authority that could cancel their registration and ability to provide advice, the financial services royal commission has recommended.

In its final report, the commission noted a “requirement of individual registration as a condition of practice is common to most professions”, including lawyers, doctors and tax agents.

It added mandatory individual registration of financial advisers would “formalise the existing [ASIC] Financial Advisers Register, and ensure that valuable information about financial advisers is made available to the public”.

“It will facilitate the introduction of a central disciplinary body for financial advisers, focused on the conduct of individual advisers and complaints about individual advisers,” it said.

It stated the single, central disciplinary body would be important as it would “ensure that appropriate disciplinary consequences are imposed where a licensee fails to impose them” and where the consequences may extend beyond an adviser’s employment with a licensee or membership of a professional association.

The recommendation included comments from commissioner Kenneth Hayne, who said he did not want to be overly prescriptive regarding the form of the new body or the powers it should have, however, he also noted: “I consider that the body should have available to it a range of sanctions varying in severity, the most serious of which must be the cancellation of the registration of a financial adviser.”

Despite suggesting advisers should be individually registered, the final report recommended licensees should still maintain their existing oversight of financial advisers, while the new central body would ensure any adviser who breached their obligations would face the consequences.

In responding to the report, the federal government indicated it would introduce a new disciplinary system for advisers, claiming it would build on the mandatory educational and professional development requirements introduced through the Financial Adviser Standards and Ethics Authority.

In a similar vein, the report also recommended a new oversight body for ASIC and the Australian Prudential Regulation Authority that would assess the effectiveness of both bodies in discharging their functions, the performance of senior figures within the regulators and how they exercise their statutory powers.

The new body should be independent of government, comprised of three part-time members and staffed by a permanent secretariat, and would be required to report to the government twice a year, according to the report.

This recommendation was also supported by the government, which stated in its formal response to the commission’s report that “while regulators are subject to a number of accountability mechanisms, an independent assessment of their strategic performance against their overall mandate was lacking”.

“The government is committed to maintaining the independence of the financial system regulators. Accordingly, this body will not have the ability to direct, make, assess or comment on specific enforcement actions, regulatory decisions, complaints and like matters,” it said.

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