AFA says AFCA not appropriate body to deem advisers ‘clean’

In its submission to the Treasury consultation on financial adviser education standards, the Association of Financial Advisers (AFA) said it’s cautious about adverse findings from AFCA serving as a determinant.

Namely, the government’s consultation paper on the planned education changes argues that relying on the Financial Adviser Register (FAR) alone to deem an adviser eligible for the experienced pathway “is not appropriate”. Instead, it proposes other sources for determining adviser misconduct including whether an adviser’s conduct has resulted in adverse findings being made against their licensees at AFCA, alongside CPD compliance, and disciplinary action taken by associations.

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But AFA has argued that some complaints made to AFCA are vexations.

“Also, and very importantly, how and where is the line drawn in terms of assessing the severity?” the group questioned.

“It is also important to ensure that there is adequate delineation between a complaint that is attributable to a licensee process or policy, versus individual adviser actions.

“We also have reservations as to whether an AFCA decision — which is not a disciplinary matter and is not subject to appeal — should be used for this purpose. It may also be the case that the complaint was received after the adviser left the licensee and was not given the option to defend their actions,” AFA said.

Moreover, the group noted its strong opposition to the inclusion of a CPD breach as grounds to exclude an adviser from the experienced pathway.

“Firstly, a CPD breach could come for a failure to achieve the target for one of the categories, despite achieving the overall 40 CPD hours target. Such matters are more administrative, and do not hit the required misconduct threshold,” AFA said.

“Beyond that, it gets too arbitrary as to what level of non-compliance with the CPD standard would warrant such action, and then there would need to be consideration of the cause, such as health, natural disaster or family tragedy reasons,” it continued.

The group isn’t too optimistic about the use of disciplinary action take by a professional association either, noting that “the inclusion of this creates a point of inconsistency given that advisers who are not members of a professional association are not exposed to the risk”.

“We would once again recommend that this is reserved for the most severe of disciplinary action, such as termination of membership”.

According to AFA, the only other consideration would be significant breach reports that have previously been submitted to ASIC, where ASIC chose not to take banning action or pursue an enforceable undertaking.

“This would depend upon the quality of the records and the completeness of the assessment. Where there are multiple clients impacted and client detriment is demonstrated, then this could be warranted,” AFA said.

However, it argued that this “would need to be objective and be applied to advisers who are the subject of action that has been taken on the grounds of serious misconduct and client detriment”.

“Most of these additional sources have material complications related to them. We favour limiting this measure to objective and readily available sources”.

Ultimately, AFA said that proving someone has a clean record “will be a difficult task”.

“The onus should not be on an adviser to prove that they have a clean record, but instead on someone else to prove that they do not have a clean record”.