ASIC ‘acting outside powers’ in adviser investigations

Following ASIC’s post-royal commission pivot to a ‘why not litigate’ stance, Hamilton Blackstone Lawyers managing director Cristean Yazbeck said he had observed several instances of the regulator “conducting functions outside its powers or without proper process” to gain information that could lead to regulatory actions against advisers.

“The worst recent client experience was that of a responsible manager of a licensee, who was contacted by ASIC to come in for a ‘voluntary’ interview in relation to another licensee under investigation,” Mr Yazbeck said.

“[After] 18 months of no contact from ASIC post-interview, two statutory notices of intent [were served]: one to cancel my client’s AFSL, the other to ban my client from providing financial services.”

Mr Yazbeck said he was provided a copy of the interview transcript after the fact and noted the client was not informed of several key legal rights he had waived by attending the interview.

“At no time during the interview was my client informed, as was legally required, that being a voluntary interview and not one conducted pursuant to ASIC’s powers under section 19 of the ASIC Act, [he] was not protected in the event of a breach of confidentiality, and – most importantly – was not protected by the privilege against self-incrimination,” he said.

Mr Yazbeck said in his recent dealings with ASIC, there had also been a strong focus on publicly appearing to “look good” rather than taking action that was legitimately in the interest of consumers.

“ASIC is on record where they have asked licensees to ‘choose’ or ‘negotiate’ their outcome, but on the condition that the outcome is one on which ASIC can issue a media release,” he said.

“To give another example, one of my clients had already moved to voluntarily cancel its AFSL for separate commercial reasons, but ASIC since advised that it still wished to cancel the licence for alleged breaches, so the media release that it so desperately craves could be issued.” 

Mr Yazbeck added that the regulator’s recent actions had demonstrated it was no longer interested in working with the advice industry, and instead wanted to “beat its chest” and “throw the book” at advisers, which could have poor consequences for consumers as more AFSLs were forced out of the industry for seemingly minor breaches.