ASIC takes action on compliance breaches

In a statement, ASIC said it has received a number of breach reports from licensees that indicate they may have failed to comply with the fee disclosure statement (FDS) and renewal notice requirements that were implemented as part of the Future of Financial Advice (FOFA) reforms in 2013.

As a result, it said it is investigating these reports and will take enforcement action where breaches are substantiated. 

“In addition to investigating these particular instances, the volume and range of breach reports indicates a significant risk of systemic non-compliance,” ASIC said.

“Therefore, ASIC will undertake a project that will test compliance with FDS and renewal notice requirements across the industry.”

ASIC said it will examine to what extent advice licensees:

• issue FDSs and renewal notices to customers;
• issue FDSs and renewal notices within the time frames set out by the law;
• include the required content in the FDSs;
• ensure the content of FDSs is accurate, for example, in describing what customers are charged for and what services customers have received;
• have appropriate procedures in place to ensure fees for ongoing services are discontinued when the arrangements are terminated as a result of licensees failing to comply with the FDS or renewal notice requirements.

Further, ASIC said its ongoing work on fee for no service failings in the advice industry has highlighted the importance of FDSs and renewal notices, which were designed to assist in mitigating future fee for no service failings by:

• FDSs enabling customers to gain a better understanding of the advice services they are being charged for and the services they are entitled to receive; and
• renewal notices, and the requirements for customers to actively opt-in before they are charged ongoing service fees, significantly reducing the likelihood of passive or disengaged customers being charged ongoing fees.

ASIC said it will test compliance with these obligations across a range of small and large licensees and will provide our findings in 2019. 

Currently, it is investigating substantial breaches of these obligations with a view to taking enforcement action.

ASIC is also supervising remediation programs, which require licensees who reported failures to issue compliant FDSs to customers and/or refund and compensate customers for the ongoing service fees charged.

Adrian Flores

Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].