Financial services businesses have just two months to implement opt-in and retrospective fee disclosure statement (FDS) processes before the regulator takes enforcement action, the Australian Securities and Investments Commission (ASIC) has advised.
Addressing an Australian Superannuation Funds Association event in Melbourne last week, ASIC Commissioner, Greg Tanzer, reminded attendees that ASIC’s current facilitative approach to compliance applies until 1 July 2015.
In November 2014, the Senate voted to disallow regulations which enacted the Coalition Government’s FoFA amendments. As a result of the disallowance, the opt-in requirement was reinstated, along with the requirement to issue FDS to existing clients. Also reinstated was the final, catch-all step in the best interests duty ‘safe harbour’ steps. At the time, ASIC announced it would take a ‘practical and measured approach to administering the law’ (click here for more).
This facilitative approach is due to conclude on 1 July this year, however, Mr Tanzer highlighted that it was only in relation to the disallowed FoFA provisions. Laws that were not changed as a result of the disallowance of regulations are already subject to enforcement action, Mr Tanzer said.
We are taking enforcement action where we see deliberate breaches of the new requirements
“Let me be crystal clear, we are still cracking down on misconduct. For example, ASIC will continue to enforce the laws that were not changed as a result of the disallowance of regulations and enforce other obligations more broadly in the advice space.
“We are taking enforcement action where we see deliberate breaches of the new requirements or failure to make reasonable efforts to comply. Where we find deliberate and systemic breaches we are taking stronger regulatory action,” he said.
Mr Tanzer also explained that ASIC was taking a careful look at other areas of financial services practice that were not currently prohibited under FoFA, such as vertical integration:
“ASIC is conducting a surveillance project looking at conflicts of interests in vertically-integrated structures and how those conflicts are managed. This project is expected to operate until mid-2015, with a report of our findings being released shortly thereafter,” Mr Tanzer said.
He also pointed to grandfathered remuneration as a potential risk factor for poor advice behaviours, noting that: “While these remuneration structures are legal, they may have a negative effect on the advice provided to consumers. On our part, ASIC continues to regard conflicted remuneration arrangements as a key risk indicator.”
