ASIC has announced it will develop a regulatory guide on AFSL breach review and remediation programs conducted by Australian financial services licensees to compensate retail clients who have suffered loss as a result of non-compliant personal financial advice, fraud or other breaches of the law or where the advice has been deficient.
According to ASIC when an advice licensee sets up an AFSL breach review and remediation program they need to consider issues such as:
- Getting the scope right – does the program cover the right advisers, the right clients and the right timeframe? For large multi-licensee institutions does the program cover other AFS licensees within the institutional group? Is the program clearly expressed? Was the conduct isolated or is there is a broader issue that affects more clients of the adviser or other advisers?
- Getting the communication right – Is the communication effective, timely and targeted to ensure clients understand and participate in the program? Has the licensee proactively contacted potentially affected clients? Does the communication clearly set out what clients need to do in order to participate in the program? Has the licensee reviewed the advice provided before contacting clients?
- Getting the process right – Is the process of review and remediation comprehensive, timely, fair, and transparent? Are there clearly defined principles to guide the process and an appropriate governance structure? Is the process well-documented? What calculations of loss have been used? Is there proper record keeping of the work that is done and the conclusions reached? Is there independent oversight of the process?
- Providing for external review – Do clients have free access to processes to review the licensee’s assessment of their advice? Will the licensee waive any time limit, monetary or other limits that might constrain the EDR scheme’s jurisdiction? Has the licensees agreed with its EDR scheme on the relevant documentation, timelines and other arrangements required to facilitate streamlined consideration, review and decision by the EDR scheme when necessary? Have clients received clear communication about their EDR options? Has the licensee offered assistance to clients who wish to seek their own independent professional advice to assist their response to a review and remediation program?
Background: responding to misconduct
I advise AFS licensees on investigating, reporting and remediating AFSL Breaches.
