The announcement follows recent developments with several advice licensees and securities dealers coming to the regulator’s attention due to compliance-related 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.
Financial services licensees should have robust recruitment processes in place when appointing representatives who have worked for a business ASIC has taken action against, ASIC warned, particularly given current “significant industry restructuring”.
ASIC deputy chairman Peter Kell said ASIC’s new powers under the Future of Financial Advice (FOFA) reforms allow the regulator to restrict or remove firms and individuals from the industry who might cause or contribute to investor losses.
“Generally, licensees have good compliance and governance standards and ensure representatives go through rigorous checking before taking them on,” Kell said. “However, we want to make sure that all licensees are fully aware of the need to do this.”
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,” Kell said.
While in many cases representatives of licensees ASIC has taken action against will comply with the law, Kell added care should still be taken where representatives have come from a culture of poor compliance.
ASIC used the specific example of securities dealer Aliom, which was forced to downsize its business following ASIC’s crackdown on representatives migrating from one licensee to another.
A review of Aliom’s operations in 2012 found it had failed to comply with conditions of its Australian financial services (AFS) licence, including supervision and monitoring of authorised representatives.
The review resulted in Aliom revoking a majority of its representative authorisations, many of whom had moved to the group from other licensees against whom ASIC had already taken action, the regulator stated.
