FAAA backs AFCA naming and shaming
The Financial Advice Association of Australia (FAAA) has backed the Australian Financial Complaints Authority publicly naming and shaming financial firms that do not pay determinations.
The FAAA has told AFCA that it strongly supports the addition of a new rule to enable AFCA to publicise the failure of firms to comply with determinations, noting that it is concerning that 64 firms failed or refused to give effect to determination in the year to 31 March.
“The failure of Financial Firms to pay AFCA Determinations and the resultant impact on the Compensation Scheme of Last Resort (CSLR) is a particularly important issue for our organisations and our members,” the FAAA said.
“Financial advisers are evidently covering more than 75% of the cost of the CSLR and the cost is expected to increase substantially over the next couple of years. The cost of the CSLR is a major threat to the financial advice sector.
“We strongly support greater publicity with respect to those who fail to pay, enabling other participants in the financial services industry to see those entities that have contributed to the cost of the CSLR,” the FAAA said.
It said that since the CSLR was established in April 2024, ASIC have, on a number of occasions, announced the cancellation of AFSLs as a result of the payment of a claim with respect to that AFSL by the CSLR but “very little additional detail is made available, which is a suboptimal outcome”.
“We believe that greater awareness of these unpaid determinations is both important and a strong disincentive to those responsible for businesses that put clients in this position,” it said.
“In terms of publication of information on unpaid determinations, we would like to see the following:
- Reporting at firm level, for each relevant sector, the total number of unpaid determinations and gross amount payable for both the current year and on a cumulative basis across all years.
- Whilst we do not want to cause excessive additional work for AFCA, we would like to see this information updated on a monthly basis (or if this is not possible, then at least quarterly).
“We also consider that it may be appropriate for AFCA to issue media releases with respect to specific firms, once the number of unpaid determinations reaches a certain threshold (such as 25 or 50). This would be an important message for the clients or former clients of this Financial Firm.”
“The publication of information on unpaid determinations will help the financial advice sector to understand where these problems are arising and be better able to project the likely impact on future CSLR levies. This would be a form of early warning system for emerging issues.”
public naming of non-compliant firms (Rule A.11.6) is misguided, offering no benefit and risking severe reputational harm, particularly for smaller FSPs.
AFCA, not a regulator, should not tarnish licensees’ reputations before ASIC completes investigations, as reported for 64 firms in 2024–25.
ASIC determines AFSL retention and issues media releases when licenses are canceled for non-compliance, which already includes non-compliance with AFCA determinations (e.g., ASIC releases 23-009MR, 24-225MR, 24-262MR, 25-067MR, 25-080MR). AFCA’s role should be confined to listing firms on its website post-ASIC action, linking to ASIC’s releases to ensure due process.
Naming prematurely undermines ASIC’s authority and risks unfair damage, given AFCA’s fallibility.