According to announcements posted on the regulator’s website, ASIC has cancelled a number of AFSLs this year as part of its efforts to “improve standards across the financial services industry”.
A number of these AFSLs have been cancelled for failure to lodge annual statements.
For example, financial services firm Grey Oak Services had its AFSL stripped recently for failing to lodge annual statements since 2013 while Investment Advisers Alliance also had its license cancelled for failing to lodge statements and reports for four consecutive years. Rebate Financial and Capstone Capital also had their licenses cancelled for the same reason.
Each of these firms had its license cancelled as part of ASIC’s “ongoing efforts to improve standards across the financial services industry”.
Principal at SMART Compliance Brett Walker, a former investigator with ASIC-predecessor the ASC, argues that while cancelling licences for failure to lodge annual statements and auditor’s reports is indeed cleaning up the industry – there needs to be more transparency on whether or not these firms posed a risk to consumers.
If they did not – ASIC’s claim that cancelling licenses for these reasons is improving standards in the industry is questionable, Mr Walker said.
“It doesn’t appear that any consumer risk was addressed, merely the lack of reporting led to a query as to whether the entity actually needed to be licensed at all,” Mr Walker told ifa.
“I cannot say for certain that these companies were dormant but it strikes me as odd that the trigger for action was failure to lodge a form in most cases.”
Mr Walker said, “If ASIC had real concerns about the AFSL’s operations there would be more than this. I’ll be fascinated to hear what ASIC says.”
ifa’s attempts to contact responsible managers for the aforementioned AFSLs were unsuccessful.
The ASIC returns are not terribly onerous, which begs the question as to why you would wish to go through the application process and then not file the returns?
As Brett said, if the major concern is what has emanated from these licensees in terms of advice to the constituents.
This matter is a good example of the myth and the reality of financial services regulation – Gray Oaks got an AFSL on 2 January 2013 and had its AFSL revoked on 7 July 2017 having never lodged a return with ASIC – it might have been dormant or it might not have been – that is, it could have been operating without meeting basic regulatory obligations for a number of years. I’m aware of an AFSL holder that was providing financial advice even though it was in administration and its PI insurance had been cancelled – the point being that really basic matters are not being regulated by ASIC.