In its submission to the Treasury review of the ASIC industry funding model (IFM), the Stockbrokers and Investment Advisers Association (SIAA) has questioned why firms in the financial advice subsector are subsidising the costs of firms who are no longer in the subsector and are the subject of ASIC enforcement and supervision action.
It argued that a major issue is the “blowout” in enforcement and supervision costs incurred by ASIC arising from the Hayne Royal Commission.
“Those entities against whom the enforcement and supervision is taking place are no longer in the subsector. A simplification of the design, structure and legislative framework would not necessarily change this outcome,” SIAA said and proposed a “more equitable model” to ensure advisers aren’t paying for the mistakes of those that have left the sector.
“Essentially, the personal advice subsector is funding large-scale litigation against the large financial services firms. Unlike litigation funders, leviable firms receive no credit for litigation wins,” SIAA said.
“This is compounded by the fact that the number of financial advisers which form the denominator when determining the levy for the subsector has fallen significantly since the model was introduced,” the group added.
Moreover, in responding to the Treasury’s question “Do stakeholders understand ASIC’s methodology for allocating costs of activities that impact multiple subsectors?”, SIAA said most are “unclear”.
“One issue that demonstrates this point is that of unlicensed advisers,” the group said.
Noting that enforcement costs for unlicensed advisers are currently charged to the personal advice subsector, SIAA cited the case of Melissa Caddick.
Namely, the group argued that while Ms Caddick was holding herself out as a financial adviser, she may also have been operating an unlicensed investment scheme and may have been providing unlicensed advice to clients. Despite this, SIAA said: “ASIC is charging the costs of the Melissa Caddick enforcement action to the personal advice subsector”.
“We consider that advisers on the FAR are doing the right thing and shouldn’t be responsible for paying the enforcement costs of someone who isn’t. We also consider that enforcement of the licensing provisions benefits the entire financial services industry,” SIAA said.
Another allocation issue raised by SIAA related to the Westpac case that involved the provision of general advice about superannuation by call centre employees of a large bank. Namely, according to the group, stakeholders have difficulty understanding why 60 per cent of the costs of this case were charged to the personal advice subsector.
“We note that licensees that provide personal advice to retail clients account for 14 per cent of enforcement costs since the commencement of the IFM (average over four years from 2017–18 to 2020–21). However, there is little transparency or understanding about what enforcement matters are being charged to the sector,” SIAA said.
Overall, the group argued that changes need to be made to the model to address the “many issues” affecting the personal advice subsector. Moreover, it noted that any change to the levy model must take into account the possibility of a continued fall in financial adviser numbers.
“The design of the current model does not meet the overarching principle for government charging that those who cause the need for regulation should pay for it,” SIAA concluded.
Where are the FPA? The silence is deafening.
When are we going to stand up and fight back as an industry????
Every single adviser and licesee should refuse to pay until change is made!
We are waiting Stephen Jones.
Would love to hear a logical reply from ASIC, I’m however comfortable it won’t be happening
And when the perpetrators cannot compensate their clients we can also pick up the tab for that too! What an Industry we work in! It’s all BS and ASIC should not be involved in the FP industry. Move everything to single disciplinary board.
Oh so ironic that ASIC charges me a fee for no service.
As mentioned on another site, Financial Advisers are being used as the Litigation Funders for ASIC, but without a share of the profits, and we still cop the reputational damage when someone who is not even an Adviser commits fraud.
So let me understand this, was Caddick even a AFS Registered Authorised Rep or RM?
No…no….
Caddick was not a financial adviser at the time of her crimes, she was a garden variety fraudster.
Hear, hear. It should not be the burden of current advisers to carry the legal costs of firms no longer in the industry (and not paying to fund the scheme), large financial institutions who have employees that are not advisers (with penalties often less than the costs to litigate) and people purporting to be advisers (ie Caddick). A person pretending to be a Dr would not be covered by the AMA if the gave medical advice causing illness.
And that FPA and AFA is how it is done. A member body actually going into bat for their members. Are you still wondering why so many advisers are cancelling their memberships? The SIAA and AIOPFP are raising real issues and not pulling punches, unlike the usual insipid response from the FPA and to a lesser extent the AFA.
I think you will find the FPA/AFA are working behind the scenes to address this. 😀
It should be sorted by 2029.
I’ll correct your typo…2092…
Spot on SIAA, and one of the reasons I will no longer continue as a personal adviser. I’m being forced out of advice by the cowboys at ASIC who have no idea of the consequences of their intractable position.
Don’t tell me they have no say in how levies are calculated and allocated.
Sorry to see you go Sue, please hold the door open for me. I’ll be carry all my framed certificates and degrees and be right behind you. Final straw for me is the way ASIC handled the Dixon issues…CSLR likely to be around $25,000 a year.
She wasn’t an unlicensed advisor…she was a fraudulent Ponzi scheme operator that stole peoples money. If I rip people off pretending to be in another profession. That profession does not pay the bill? How is this even considered to be allowable?