Association ‘not convinced’ on disciplinary panel

In its submission to the government’s consultation on the single disciplinary body, the AFA said provisions in the legislation allowed members to be appointed to the Financial Services and Credit Panel – which currently sits inside ASIC and is to be charged with disciplinary responsibilities – with no experience in the advice sector.

“We note in Section 141(2) of the ASIC Act that FSCP members could include those with experience in business, administration of companies or law,” the association said. 

“We are not convinced that people with these backgrounds would have the necessary skills to consider disciplinary matters against financial advisers in the context of the extremely complex laws that apply to financial advisers. In our view, it is people who have a strong understanding of financial advice who would be best placed to participate in FSCPs.”

The AFA added that the law also gave ASIC the power to terminate members of the panel “seemingly without reason”, although panel members would be appointed by the minister.

“In the context that ASIC makes the decision to appoint individuals to specific FSCPs, our concern is that ASIC could choose to use panel members who hold similar views to them and can then choose to terminate panel members who have opposing views,” the association said.

The AFA also pointed to several flaws with the process of convening a panel under the proposed reforms, saying that if a panel member was disqualified from sitting for reasons such as a conflict of interest, “it appears possible that a panel could be reduced to as few as the Chair, and in our view this is not appropriate”.

Further, the association said the rules were not prescriptive enough around how meetings should be convened, and that the panel should be appropriately resourced with a secretariat function that could take formal meeting minutes and provide “support and training” to panel members.

“We note the provision for decisions to be made without meetings – whilst this might be good for administrative efficiency reasons, we are concerned that this could lead to an outcome where the system is set up to rubber stamp the recommendations of the FSCP Chair and that this would lead to decisions being dominated by the views of ASIC,” the submission said.

“Seemingly other than the part time participants in the panels, there will be no other resources that directly belong to the FSCP. 

“We pose the prospect of there being some dedicated FSCP people that could constitute an FSCP secretariat and provide resourcing to ensure that there is support and training provided to the FSCP members and that there is some consistency in how matters are assessed.”

The association has previously criticised the lack of resourcing for the new system that significantly expands the scope of matters to be considered from a disciplinary perspective, with ASIC commissioner Danielle Press also suggesting at a recent industry conference that the regulator was concerned by the resourcing “challenges” the panel presented.

“I think there are challenges within the bill in that the way the legislation is written we must refer all complaints – that is a very interesting bar that is sitting in that regulation at the moment, and you might have also noticed we have no funding for this,” Ms Press told the Stockbrokers and Financial Advisers Association conference last month. 

“We are trying to get our heads around how do we refer all of these at apparently zero costs. It’s not going through the industry funding model, but it creates some interesting outcomes when you’ve got all those complaints coming through. The cost of sending them through the full process will be significant and undermines the whole integrity of the system.”