ASIC has released Regulatory Guide 256 Client review and remediation conducted by advice licensees. The Guide incorporates lessons learned from recent large-scale reviews.
A review and remediation process is a set of activities set up within a business to review the services provided to clients, when a systemic issue caused by misconduct or other compliance failure in relation to those services has been identified, and to remediate clients who have suffered loss or detriment as a result (whether monetary or non-monetary).
The guide considers how reviews interact with AFS licensing obligations and IDR and EDR schemes.
Although the RG sets out ASIC’s guidance on review and remediation conducted by Australian financial services (AFS) licensees who provide personal advice to retail clients (advice licensees) ASIC says it should also be applied to review and remediation that is not related to personal advice to the extent relevant. The RG applies to personal advice about both Tier 1 and Tier 2 products.
ASIC defines a ‘systemic issue’ as an issue causing actual or potential loss or detriment to a number of clients as a result of misconduct or other compliance failure by an advice licensee or its
current or former representatives.
Key principles
The key principles set out in the guidance are:
•review and remediation is likely to be appropriate where a systemic issue has occurred that may have caused loss or detriment to clients
•the scope of review and remediation should ensure it covers the right advisers, the right clients and the right timeframe
•the process of review and remediation should be comprehensive, timely, fair, and transparent. There should be clearly defined principles to guide the process and an appropriate governance structure
•effective, timely and targeted communication is key to ensuring that clients understand the review and remediation and how it will affect them; and
•clients should have access to an EDR scheme if they are not satisfied with the remediation decision made.
ASIC says the principles in the guide can be scaled up or down, depending on the size of the review and remediation, and may be adapted to suit advice licensees of different sizes and with different internal structures.
How far back must the review go?
ASIC will not generally expect a licensee to review advice given to clients more than seven years before it became aware of the misconduct or other compliance failure. This is consistent with the requirement for AFS licensees to keep certain records in relation to the provision of financial product advice for at least seven years. However, in certain circumstances—such as where the client has held the product about which advice was given for a long period of time—ASIC says it may be appropriate to review records going back further than the minimum seven years.
Settlement deeds
The guide also notes that settlement deeds should only be relevant to the conduct being remediated and should not restrict a client’s ability to speak to ASIC (or other Commonwealth, state or territory agencies), the licensee’s EDR scheme, an adviser’s professional association or legal representation about a matter—for example, if the client has concerns about the operation of the review and remediation, or the way in which their matter has been reviewed. Settlement deeds should also not restrict a client’s ability to speak to ASIC (or other Commonwealth, state or territory agencies) about the original misconduct or other compliance failure that gave rise to the remediation outcome.
