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ASIC, Financial Planning

Protocol will enable five-year work check

adviser work check

A draft reference-checking protocol includes the ability for licensees to check five years of an adviser’s work and audit history before deciding to employ them.

ASIC has released a draft protocol for the reference checking of financial advisers that requires any former employers to provide details of compliance breaches and remedial action that occurred within the previous five years to prospective employers conducting an work history check on an adviser.

The corporate regulator released the draft protocol as part of a consultation paper seeking feedback from the financial advice sector about reference checking and information sharing when hiring advisers.

An information sheet accompanying the draft protocol and consultation paper stated a recruiting licensee would be required to request a reference about a prospective representative from the referee licensee, and could request that information from all former employers going back five years.

According to the consultation paper, recruiting licensees would be able to ask about an adviser’s period of employment, their main responsibilities, the outcome of compliance audits and any follow-up action required from those audits, including remedial action, and any breaches of the Corporations Act and if those breaches led to their departure.

The information sheet stated referee licensees were obligated to respond to a reference check within 10 business days, but were not obligated to provide information without the adviser’s authorisation or outside the reference framework developed by ASIC.

“You [the referee licensee] must not give a recruiting licensee a reference if the recruiting licensee has not given you a copy of the written consent of the prospective representative or has given you written notice that the prospective representative has withdrawn their consent,” it said.

“You must give a written reference to the recruiting licensee that includes all the information you are aware of and reasonably consider to be relevant to answer the template reference request.

“You do not need to give additional information requested by a referee licensee that is not covered by the template reference request.”

ASIC stated information could only be provided from a former licensee when an adviser had given consent for the work history check and in that case a licensee could not refuse to supply it and could face administrative and enforcement action if they did not comply with their obligations under the proposed protocol.

It added where an adviser had not given consent and a former licensee did not provide information, a licensee could still employ or authorise that adviser providing it has ensured they were adequately trained, competent and complied with relevant legislation.

“The ASIC protocol also does not prohibit you employing or authorising a prospective representative if you have taken reasonable steps and a referee licensee fails to comply with their obligation to give you a reference, or if you receive a reference that contains adverse information about a prospective representative,” it said.

The development of the protocol was a recommendation of the financial services royal commission and the release of the draft follows the introduction of the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 into parliament on 12 November.

The draft protocol and information sheet are based on the bill. The consultation period opened today and will close on 29 January 2021, with ASIC planning to release a legislative instrument in June 2021 that would take effect from 1 October 2021.

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