ASIC Announces Policy on Adviser Warnings

Warnings and reprimands will not be recorded on the Financial Advisers Register and ASIC will generally not publish the names of the financial advisers who it warns or reprimands, the regulator says.

In releasing an Information Sheet on warnings and reprimands given to financial advisers ASIC notes however, it may consider publishing names “…if, for example, the financial adviser’s link to the conduct is already public knowledge.”

A statement from the regulator says the requirement for ASIC to give warnings and reprimands to financial advisers in specified circumstances was introduced by the Better Advice Act.

It notes that its Information Sheet 270 Warnings and Reprimands explains:

• What warnings and reprimands are
• When ASIC will give a warning or reprimand
• How ASIC will communicate the giving of a warning or reprimand
• When and to whom ASIC will provide procedural fairness before giving a warning or reprimand
• The adviser’s right of review of ASIC’s decision to give a warning or reprimand.

As background ASIC says the Better Advice Act gives effect to a Recommendation of the Royal Commission by giving the Financial Services and Credit Panel (FSCP) its own legislative functions and powers to address a range of circumstances and misconduct by financial advisers. (See: ASIC Consults on Disciplinary Panel Regulatory Guidance.)

“Under the Better Advice Act, from 1 January 2022, ASIC must convene a sitting panel of the FSCP in circumstances prescribed in … the Australian Securities and Investments Commission Regulations 2001.

“In other circumstances relating to less serious misconduct, ASIC is not required to convene a sitting panel but must give a warning or reprimand if we do not propose to convene a sitting panel or exercise our other enforcement powers.”

What are warnings or reprimands?

The Information Sheet explains that a warning or reprimand is a letter sent by ASIC to a financial adviser to warn or reprimand them “…where ASIC reasonably believes that specified circumstances (the warning or reprimand circumstances) exist.”

The letter will contain a statement of reasons for ASIC’s decision to give the warning or reprimand and that ASIC can give either a warning or a reprimand to address a specified circumstance, not both.

“Generally, a warning will warn a financial adviser against continuing the conduct or circumstances that led to us giving the warning, whereas a reprimand will admonish the financial adviser in relation to the conduct or circumstances that have already ceased.”

The procedural requirements it follows are the same for warnings and reprimands. For example, in both cases it must:

• Provide a copy of the warning or reprimand to the financial adviser’s AFS licensee(s)
• Provide a statement of reasons.

When ASIC will provide procedural fairness

The information sheet also notes that before ASIC gives a warning or reprimand, and gives a copy to the financial adviser’s AFS licensee(s), it “..must consider providing procedural fairness to any person that will be directly and materially adversely affected if the warning or reprimand is issued.”

…typically, the financial adviser who ASIC proposes to warn or reprimand will be entitled to procedural fairness…

ASIC expects that, “…typically, the financial adviser who ASIC proposes to warn or reprimand will be entitled to procedural fairness.

“Among other reasons, this is because ASIC must give a copy of the warning or reprimand to the adviser’s AFS licensee(s). We consider that this could, in certain circumstances, have a direct, adverse effect on the adviser’s interests, including their reputation and livelihood.”

It will, however, “…decide whether a financial adviser is entitled to procedural fairness on a case-by-case basis.”

Click here for the information sheet.