Employee advisers under ASIC’s watch

In order to weed out ‘bad apples’ from the financial advice industry, the corporate regulator has proposed extending its oversight to employee adviser representatives of Australian financial services licences (AFSLs).

In its submission to the Senate inquiry into its performance – released yesterday – the corporate regulator recommended a number of policy changes to help it weed out unethical operators, including a new register for some financial advisers.

“Under the current financial services regulatory regime, authorised representatives must be registered with the [Australian Securities and Investments Commission] ASIC. However, there is no central register for employee representatives,” the submission states.

“This means that ASIC has no direct oversight of employee adviser representatives, including those who provide personal advice, and must rely on licensees to ensure the competence and integrity of these representatives.

“This can result in very real difficulties in ASIC’s ability to locate and take action against bad apples in the financial services industry,” it continues, adding that the regulator has struggled to keep track of individual advisers, following the collapse of a licensee.

Specifically, ASIC has called for an extension of its powers to register all individuals licensed to give financial product advice, as well as incorporate extensive employment history information.

Other jurisdictions such as the United States and UK “currently administer or are moving towards individual disclosure and accountability of regulated advisers”, the submission points out.

In August, the regulator flagged its concerns that licensees were not adequately scrutinising the history and record of prospective authorised representatives.

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