The Australian Securities and Investments Commission (ASIC) is seeking feedback from financial advisers and licensees regarding its proposed guidance on the creation of review and remediation programs.
The regulator has released Consultation Paper 247: Client review and remediation programs and update to record-keeping requirements, in which it sets out how such programs would operate as well as proposed changes to record keeping for Australian financial services (AFS) licence holders.
“A key part of an AFS licensee’s obligations is remediating clients for losses suffered following non-compliant advice, fraud or other breaches of the law. At times, establishing a review and remediation program may be the most appropriate approach to address client loss,” the corporate regulator stated.
“The draft guidance sets out how an effective review and remediation program should be designed and operated and how such a program operates alongside other key consumer compensation obligations, namely the internal and external dispute resolution obligations.”
ASIC said the push behind the proposed guidance has come from the growing number of review and remediation programs which have been put in place by AFS licensees – either voluntarily or at ASIC’s request – in the past few years.
The proposed guidance is intended to apply to all advice licensees that conduct a review and remediation program in relation to personal advice.
“In light of our experience and the growing trend of these programs, ASIC announced on 6 May 2015 that we would develop a regulatory guide incorporating our guidance on review and remediation programs conducted by AFS licensees that provide personal advice to retail clients,” the regulator stated.
Despite the most prominent review and remediation programs being undertaken by banks and other large financial services groups the consultation paper stated it was expected that all licensees offering personal advice would be covered by the proposals.
“The proposed guidance is intended to apply to all advice licensees that conduct a review and remediation program in relation to personal advice. This is regardless of the licensee’s size or the size of the review and remediation program,” CP 247 stated.
“The intention of the guidance is that the principles can be scaled up or down, depending on the size of a program, and can be adapted to suit advice licensees of different sizes with different internal structures.”
The most important review process is when a client enters into a service or product arrangement.
A properly structured process that incorporates technology to track each stage of the advice path, will proactively monitor and flag potential issues early before they become a big issue later.
There is no downside to this as all interested parties can improve their productivity and outcomes with collaborative, easy to follow protocols.
The technology is available and it may require the regulators to demand a simpler, more effective review process.
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