Court & ASIC: “Licensees are responsible for the advice of their Advisers”
Source Of News
By Joel Ronchi, COO, 31st May 2022
At Fourth Line, we are reimagining compliance by empowering licensees and advisers to build trust, wealth, & deeper relationships with clients through quality advice.
What responsbility do licensee have for advice?
Licensees are responsible for the advice their advisers provide, or more exactly, licensees are responsible for ensuring that the advice process adheres to the financial adviser conduct and disclosure obligations under s961B, G, H, & J.
s961L of the Corporations Act states …
“(a) financial services licensee must take reasonable steps to ensure that representatives of the licensee comply with sections 961B, 961G, 961H and 961J.”
s912A of the Corporations Act states …
“(1) A financial services licensee must:
(a) do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly;
(d) have available adequate resources (including financial, technological and human resources) to provide the financial services covered by the licence and to carry out supervisory arrangements; &
(h) have adequate risk management systems.”
Both sections are a civil penalty provision.
What is the impact of these sections on how licensees operate their business?
The legal obligations created under s961L and s912A are “proactive” ones.
Proactive means actions and oversight need to be forward looking. For example, adherence to s961L should not be managed by “traditional” backward looking audit processes that focus on a random selection of SOAs that have already been presented to clients.
Genuine advice oversight leads to mitigating financial risks associated with breach reporting and general licensee obligations, which benefits everyone – the licensee, the adviser, and the client.
For any licensees or advisers who doubt this, or are unsure of their level of obligations, please take a look at the $6 million judgement recently handed down by the Federal Court against RI Advice.
The judgement suports the notion that licensees have a proactive obligation under s961L to monitor their advisers, and enforce outcomes.
A quote from ASIC sums it up nicely is … ASIC Deputy Chair Sarah Court said ‘These complex products were not suitable for Mr Doyle’s clients, many of whom were approaching retirement. RI Advice should have been properly monitoring Mr Doyle’s advice to ensure he was complying with the law. The $6 million penalty handed down by the Court against RI Advice sends a strong message to financial services licensees to properly monitor the advice given by their advisers to make sure consumers are protected.’
What do these sections mean for the provision of personal advice, when read together?
The market-leading, forward-thinking licensees and advice practices have moved, or are moving, to100% prevet of all SOAs.
The technology already exists to make this a reality. The days of waiting 1-2 weeks for licensee prevet turnarounds are gone.
Reach out to find out more about how Fourth Line can help implement proactive strategies designed to fix issues, avoid problems, and avert breaches associated with the provision of personal advice.
Contact our COO Joel Ronchi 0408 056 679 or
Fourth Line is a rigorous RegTech risk management and compliance system for advice practices, dealer groups and other wealth management participants. Fourth Line uses algorithmic approaches to simplify the complexity in advice reviews whilst maintaining human oversight, empowering compliance teams to coach and develop strong advice behaviors through data driven insights from advanced analytics for adviser, practice/dealer group and industry benchmark comparison with centralised document storage and access to meet regulatory needs.
For information email: email@example.com