ASIC guilty of regulatory over-reach says FPA

Mike Taylor

Managing Editor and Publisher

24 April 2023

The Australian Securities and Investments Commission (ASIC) has been guilty of regulatory over-reach, often tightening requirements and implementing changes which are not required under the law, according to the Financial Planning Association (FPA).

In a submission to the Senate Economics Legislation Committee inquiry to ASIC investigation and enforcement, the FPA (now the Financial Advice Association of Australia) said there existed a disconnect between ASIC’s regulatory guidance and its enforcement action.

“Licensees have often tightened their requirements and implemented changes to processes and systems for financial planners which are not required under the law or in regulatory guidance because of enforcement action taken by the Regulator,” the submission said.

“For example, as detailed in Report 515, ASIC audited and reviewed the financial advice files of the largest five licensees. As a result of the review, the Regulator mandated additional training standards that went beyond the requirements in the law and their own regulatory guidance.”

“There are also examples of ASIC action taken for a breach of s961B against financial planners even though they had complied with the best interest duty safe harbour steps as set out in regulatory guidance,” the FPA submission said.

“Whether it is within the Regulator’s mandate to impose such conditions on licensees is not the issue. It is the uncertainty that this enforcement action creates that is concerning and is having a significant impact on the profession.”

“Additionally, in many circumstances, ASIC does not publish detailed explanations of their regulatory enforcement unless it is specifically captured in a report.

“ASIC’s over-reach is evident in some guidance such as ASIC RG 277: Consumer Remediation, which set new obligations even though no regulation making power was given to ASIC in the relevant provisions of the Act,” the submission said.

Elsewhere in its submission, the FPA said that the penalties for those providing unlicensed and unqualified advice for be harsher than those which apply to licensed advisers and that there should be restrictions on using the terms ‘financial planner’, ‘financial adviser’ and terms such as ‘financial coach’, ‘financial mentor’ and ‘financial guru’

“The enforcement regime should also be touch on offences of fraud and dishonesty,” it said.