AFCA won’t appeal Supreme Court decision after rule change

The financial services ombudsman was forced to change its rules after the court also found it did not have jurisdiction to consider certain types of disputes against licensees.

Appearing at a Senate joint committee on Friday, AFCA COO Justin Untersteiner confirmed it would not appeal the decision.

“AFCA had always had a view that we did have jurisdiction and that would be consistent with the Corporations Act. The Corporations Act does place liability on the licensee in that situation,” Mr Untersteiner said.

Following the decision, ASIC directed AFCA to update the rules from 13 January “to provide clarity” following the issuing of a new ASIC legislative instrument on 5 January.

The instrument relates to a decision in the NSW Supreme Court last year, where it was found that a mistake in the drafting of AFCA’s rules meant that the ombudsman did not have jurisdiction to consider complaints relating to poor advice that had been given outside of the authority of the adviser’s licensee.

In the case of DH Flinders v AFCA, Justice James Stevenson found that while an advice practice licensed under corporate advisory group DH Flinders had given the wrong advice to a client, the practice had acted outside the scope of the licensee’s authority when giving the advice. While licensees were responsible for all conduct of their representatives under the Corporations Act, whether the conduct was inside or outside their authority, this was not the same under the AFCA rules, the judge found.

“We now do have jurisdiction, however our rules don’t apply retrospectively,” Mr Untersteiner said.

“Cases that were open before the new rules took effect are caught by that decision.

“We are currently reviewing cases that could be caught by that decision. It’s not a simple investigation. There is a lot of work to undertake to understand whether the authorised representative was acting outside the scope of their authority.”

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.