The financial services ombudsman has changed its rules and conceded a number of previous advice complaints may be affected after the Supreme Court found it had acted against its obligations and did not have jurisdiction to consider certain types of disputes against licensees.
In a statement, AFCA said it had amended its rules as of 13 January to "provide clarity regarding AFCA’s jurisdiction to receive complaints about the conduct of an authorised representative of an AFCA member", 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.
Further, Justice Stevenson found that the conduct of AFCA – who had encouraged the complainant in the case to join the licensee onto its dispute after the advice practice became insolvent – had been "troublesome", according to commercial law firm Holman Webb Lawyers.
"The conduct of AFCA in suggesting that the claimant join DH Flinders was not consistent with its obligation to deal with complaints in a way which is independent, impartial and fair and which provides procedural fairness to all the parties," the law firm wrote in a recent blog post about the case.
The law firm said historical complaints that related to the specific licensee obligations mentioned in the case may now need to be litigated rather than taken to AFCA.
The authority said its rules had now been changed to reflect similar obligations to the Corporations Act, and that "as the vast majority of complaints AFCA considers are between parties with a direct relationship, e.g. a bank to a bank customer, these complaints are not impacted by the rules change".
AFCA said there were "a small number of complaints received" prior to the rules change that were "potentially impacted by the judgment" and that it was in contact with the affected firms and consumers.
"For the small number of complaints which may be outside AFCA’s rules, AFCA will be encouraging the financial firms involved to consent to AFCA considering the complaint to achieve an early resolution and avoid the prospect of potential court or other action by the complainant," the authority said.
The scrapping of FASEA does not go far enough when it comes to reducing the regu...
Labor’s financial services spokesman has blamed the regulator’s unwieldy int...
The advice technology group has said it will deliver an industry standard techno...