Licensees should have “robust recruitment processes” in place when appointing representatives who have worked for a business against which ASIC has taken action, the regulator warned, particularly given current “significant industry restructuring”.
The announcement follows recent developments with several advice licensees and securities dealers coming to the regulator’s attention due to compliance issues, with a number of affected representatives likely or already confirmed to be moving to other licensees.
These include advice dealer groups AFS Group, AAA Financial Intelligence and AAA Shares, and Morrison Carr Financial Services, as well as securities dealers Clearing & Settlement Services and Halifax Investment Services.
Licensees should ensure migrating representatives are competent and adequately trained, according to ASIC. It is also important that they are screened and have their background checked.
In addition, licensees should have “adequate” financial, technological and human resources to supervise and monitor new representatives and “adequate supervisory arrangements” in place to identify and address deficiencies quickly.
“ASIC is continuing to closely scrutinise licensees’ obligations to demonstrate adequate monitoring and supervision and will not hesitate to take action where we find those practices deficient,” said ASIC deputy chairman Peter Kell.
In addition, typically it’s “too easy” for advisers to move on, which can create issues in relation to a licensee’s professional indemnity insurance, according to Michael Gottlieb, director of Mega Capital.
There needs to be a greater understanding of “who is causing the problems” in financial advice, and not allowing them to move from one dealer group to the next, according to Gottlieb.
“Ninety per cent of the industry [is] providing very appropriate and good financial planning advice, but… the majority are being tainted by the minority of advisers who have experienced significant claims,” he said.
