ASIC, Regulation

Disciplinary body needs teeth

New disciplinary body must have powers to effectively punish advisers.

Any new disciplinary authority for financial advice formed on the back of recommendations in the banking royal commission should have powers to mete out effective punishment, including to individuals, a conference panel has proposed.

SAS Group director and former federal Labor parliamentary secretary Bernie Ripoll told the SMSF Association National Conference 2019 in Melbourne last week that he agreed with commissioner Kenneth Hayne’s recommendation for the formation of a disciplinary body to restore trust and enable financial advice to become a profession.

Ripoll added though the disciplinary body must be equipped with appropriate mechanisms.

“One of the key points was not just to have a disciplinary body, but the point of having one was that it can do something, including to an individual,” he said.

“So it could actually completely ban an individual from practising.”

He said he surmised from the recommendation that financial advisers would need to be individually licensed.

Furthermore, the ultimate penalty could be imposed by the disciplinary body, which could decide on the arrangements for the licence in question, including revoking licences from financial services firms, he added.

The royal commission’s final report recommended the introduction of a new disciplinary system that would require all financial advisers providing personal financial advice for retail clients to be registered.

An additional requirement would be for Australian financial services licence holders to report serious compliance concerns to the disciplinary body, and the body would also provide the ability for clients and stakeholders to report information about the conduct of financial advisers.

Ripoll said the body would be authorised by the government and would also have a register for all financial advisers.

“I think the key take out for me out of that [recommendation] was you can’t have a profession unless you have some sort of disciplinary body, some sort of penalty for doing the wrong thing,” he said.

“Hayne rightly drew the point around this coherence issue that really now you can get away with doing things. So somebody who’s intent on doing the wrong thing can almost just skirt around the edges. There’s no real incentive to do the right thing in terms of the profession.”

He added it will be a challenge to establish a coherent structure that will allow the financial advice sector to transition into a profession.

Copyright © SMS Magazine 2019

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital