Extra costs for disciplinary body could be ‘substantial’

AFA acting chief executive Phil Anderson told ifa the disciplinary system proposed by the government under its draft legislation released last month would see ASIC required to convene its Financial Services and Credit Panel (FSCP) for all levels of breach of an adviser’s legal obligations or the FASEA standards.

“We’re concerned about the low level type matters that might end up being considered by a FSCP that could lead to a very substantial number of matters, and that that will then drive up costs,” Mr Anderson said. 

“In our view, it should only be the significant or serious matters that end up in front of a disciplinary panel. There’s no point having them look at someone who has missed their CPD target or someone who has got a minor issue with respect to inadequate documentation or compliance with one of the seven steps in the best interest duty safe harbour.”

Mr Anderson said the AFA had pushed for more clarity around the levels of breach that could be considered by the panel in its submission to the government’s consultation, and warned that if the panel needed to assess even minor offences, additional costs to the industry “would be substantial”.

“We understand that the purpose is to put in place a range of other disciplinary measures other than bannings, but that should not be dealing with administrative matters – that should be dealing with more material, significant matters,” he said. 

“Licensees already have that role and where those things are identified and they need to be remediated, that is the licensee’s responsibility. We want this to be focused on more serious matters and if that’s the case, the cost of this will not blow out.”

While the corporate regulator had had its funding reduced slightly from $772 million to $717 million in this year’s budget, Mr Anderson said the association expected additional costs on top of these figures to establish and run the disciplinary body.

“At the aggregate level you don’t know how the funding flows through to the parts of ASIC we take most interest in such as the adviser section, and you compound that by saying the disciplinary body regime is supposed to start from 1 January, so what is that going to mean for resourcing requirements and needs,” he said.

“It’s not hugely clear to me how that’s been taken into account. There will be a registration fee for financial advisers, but I don’t expect that is going to be the sole mechanism of funding the disciplinary body – there will be a provision for increasing the ASIC funding levy. 

“And based upon the draft of how it would operate, they would be looking at a very large number of matters so it would be a key driver of costs.”