Good faith disclosure does not guarantee whistleblower protection

An adviser might raise a concern about misconduct with their professional association rather than going straight to ASIC. Without realising it, they could be stepping outside the law’s protection. For financial advisers, whistleblower protection is not as straightforward as it appears.

That is the blind spot the Financial Advice Association of Australia has flagged. The association raised the point in a submission to Treasury’s review of the tax and corporate whistleblowing regimes, which it lodged on 29 July.

Two ways advisers fall under the regime

Financial advisers fall under the whistleblower framework in two separate ways. As an authorised representative acting for a licensee, an adviser counts as an “associate” under the corporate regime.

As a professional providing services to individuals, companies and trusts, an adviser (and their client) can also fall under the tax whistleblower regime.

Both regimes carry legal protections for people who disclose wrongdoing. But those protections only apply when the disclosure goes to specific places: chiefly ASIC, APRA, the ATO, the AFP, the Tax Practitioners Board, the Inspector-General of Taxation or the ACNC.

The professional body gap

Professional bodies are not on that list. The FAAA runs a formal complaints process and an anonymous disclosure service, and its independent Conduct Review Commission oversees both. It says that gap leaves whistleblowers and the association itself exposed.

A member, client or staffer who discloses misconduct to the FAAA in good faith may assume whistleblower protections apply. However, the law says otherwise.

And when the FAAA refers a matter on to ASIC, it must provide information about who raised the concern. The referral, according to the association, risks breaching the same laws it is trying to uphold. Passing on identifying details without statutory cover is exactly what the whistleblower provisions penalise.

What the FAAA wants changed

The submission sets out four recommendations, two of which go directly to closing that loophole. The first would extend whistleblower protection financial advisers and other individuals need when disclosing in good faith to a professional body.

The second would give a professional body third-party protection when it passes that information on to a regulator or authority.

A third recommendation would allow regulators and government agencies to share information with Tax Practitioners Board recognised associations and ASIC prescribed bodies, turning what is currently a one-directional exchange into a two-way channel.

The fourth recommendation deals with a separate overlap: AUSTRAC.

Reporting entities under the Anti-Money Laundering and Counter-Terrorism Financing Act must lodge a Suspicious Matter Report when they have reasonable grounds to suspect a customer or transaction is linked to a crime. That includes tax evasion.

That report has to identify the person who formed the suspicion, in effect the whistleblower. Strict tipping-off rules apply on top of that. But the whistleblower regime does not exempt AUSTRAC from its penalties for identifying a discloser.

The FAAA says that leaves two regimes applying inconsistently to the same client and the same conduct. It wants Treasury to spell out how AML/CTF reporting interacts with whistleblower protection.

Why the FAAA has standing to raise this

The FAAA has standing to raise the professional body point for two reasons. It is a Tax Practitioners Board recognised tax agent association, and s127(4) of the ASIC Act already lets ASIC share information with prescribed associations. Its argument is that the whistleblower regimes have not caught up with the role professional bodies already play in surfacing and escalating misconduct.

What it means for advisers now

For advisers, the current framework is more unforgiving than most realise. Protection is not automatic just because someone disclosed in good faith to a body that exists to receive it.

If an adviser, staff member or client wants the statutory protections that come with whistleblowing, the safest path today is a disclosure straight to ASIC, APRA or one of the other exempted bodies.

A professional association’s complaints line is not enough on its own, however genuine that channel is. Treasury’s review is still at the submission stage, so nothing changes yet.

But it puts a specific, fixable gap on the table. And that gap goes to how confidently advisers and their clients can rely on the systems built to encourage them to speak up.