Insights for advisers, by advisers

New regulatory framework taking shape for advisers

•5-ASIC

April may well be remembered as the beginning of the next phase of financial advice in Australia. While the establishment of FASEA may have had far reaching implications, a triumvirate of news this week is set to shape the way advice is delivered and advisers are regulated for decades to come.

Leading the headlines was some apparent flexibility from the regulator when it comes to the broadening use of shorter, records of advice or ROAs, when advising clients on simple matters. With delivering affordable advice a key goal of ASIC in the coming years, they have clearly listened to the hundreds of submissions received from financial advisers operating across the country.

Subsequently, the Financial Services Council have flagged a series of significant changes they recommend be made to the financial advice regulatory landscape, similarly replacing unwieldy statements of advice with letters of advice and calling for the Code of Ethics to be adopted as the key source of ‘truth’ for adviser behaviour.

This week, we finally saw the release of the new regulatory ‘framework’ set to determine the oversight and management of the so-called ‘single disciplinary body’. Coming out of the Royal Commission recommendations, despite the headlines, the proposed changes to the regulation of advisers seems broadly in line with expectations.

Under the new legislation, the role of FASEA will ultimately be taken over by the Financial Services and Credit Panel (FSCP), who will be tasked with regulating and managing the registration of the country’s 20,000 remaining financial advisers. According to the proposed changes, advisers will need to register or renew their adviser registration with ASIC on an annual basis, not unlike other professional associations. In a positive move for those deemed tax (financial advisers) there will no longer be any need for advisers to register under both pieces of law, ASIC will maintain the tax (financial) adviser registration, simplifying the process significantly.

The changes are by no means earth shattering, the FSCP, chaired by a member of ASIC and at least two industry representatives will be able to undertake actions including warnings, reprimands, order additional training, counselling, supervision or requiring additional reporting requirements from financial advisers. They will also be able to make banning orders where an adviser is deemed to have breached a ‘restricted civil penalty provision’.

These provisions include failing to meet the education and training requirements (S921D), failing to abide by the Code of Ethics (921E), not meeting the requirements of provision relevant providers (921E), failing to abide by a direction previously given by the FSCP (921M) and providing advice without being registered (921S).

Advisers will be subject to fines of up to 12 penalty units, or $2,664, and will have 28 days to respond to infringement notices they receive. Under the proposal changes, all advisers will need to register from 1 January 2022 and must be registered by 1 January 2023 to continue to provide advice.

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