FAAA urges ASIC to remove out-dated class order bureaucracy
A 10-year-old Australian Securities and Investments Commission (ASIC) class order is past its use-by date, generates high levels of compliance work on advisers and increases the cost of delivering financial advice.
That is the essence of a Financial Advice Association of Australia (FAAA) feedback to ASIC on extending the Class Order covering record-keeping obligations for financial services licensees – CO14/923.
Instead, the FAAA says financial advisers should be able to rely on their professional judgement “rather than type of prescriptive record keeping obligations that are set out in this Class Order”.
Further the FAAA says that its negative views on the class order are consistent with the values and standards contained in the financial adviser Code of Ethics and have also been reflected in the Quality of Advice Review and the Government’s Delivering Better Financial Outcomes reforms.
“The obligations in Class Order 14/923 generate a high amount of activity and effort to comply with, particularly as they relate to 912G(2)(a) and 912G(2)(b). Compliance with these obligations has caused a significant increase in the cost of providing financial advice,” the FAAA said.
“This Class Order is now 10 years old, and during this time, there have been a number of changes to the Corporations Act providing the opportunity for the substance of this Class Order to be built into the law,” the FAAA response said.
“As an example, section 962X of the Corporations Act “Obligation to keep records of compliance” defines record keeping obligations with respect to ongoing fee arrangements. The same thing should apply with respect to the record keeping obligations for the Best Interests Duty and related obligations.,” it said.
“The Government’s proposals with respect to the repeal of the safe harbour steps in Section 961B(2) will also significantly impact the relevance of this Class Order,” the FAA said.
The FAAA response also pointed out that Section 912G(3) of the class order also required that the retention of records obligations continues to apply even when a licensee ceases to operate.
“We are uncertain as to how this might work in practice, particularly where the licensee is in administration or in liquidation. It would seem to be appropriate to have some discussion within the Class Order on how these obligations can be transferred to another business or licensee,” it said.
“This obligation is extended to Authorised Representatives in Section 912G(4). In this case, the situation could be further complicated by the death of an individual AR. It is unclear how this would work in that context. The continuation of these record keeping obligations beyond the closure of these businesses or the death of an individual, in the absence of an obvious alternative solution, is quite problematic.”
Elsewhere in its response, the FAAA urged ASIC to advocate for the Class Order obligations to be folded into the DBFO reform agenda.
FAAA should have been pushing for this and other legislation/regulations to be dropped as a trade off for their support of the FASEA code of ethics, exam and education requirements. Otherwise it was just red tape on top of red tape. It was pointless imposing all of the requirements of a profession without removing the restrictions which don’t apply to professions. But here we find ourselves, with our numbers continuing to decline
ASIC Report 413 should definitely be abolished & ASIC take accountability & fix the bungled so called investigations they did based on insurance churning. All they had to do was look at the evidence, you can clearly see its severely manipulated & incomplete.
FAAA cant push open their own front door let alone push an agenda to help advisers
well bugger me, what are they doing, its all very wordy/fancy but little if any real progress, may I remind the FAAA it’s not working here !
It is no wonder the productivity of Australia is down the toilet with all this unnecessary red tape. All it does is create a bigger public sector that sucks the life out of the private sector. ASIC should use their resources better.
Unnecessary red tape is a driver of inflation and higher interest rates. Rather than sitting on their hands and vilifying RBA governors, the govt needs to take action on excessive red tape.