AFCA ombudsman addresses adviser concerns

AFCA ombudsman Shail Singh has addressed common adviser concerns regarding the authority's introduction of legacy complaints.

Speaking at a recent Financial Planning Association of Australia event, Singh said AFCA will apply the standard of the relevant time in complaints where laws, codes, or standards have changed, but AFCA rules as of 30 June 2019 will be applied.

AFCA furthered clarified to Financial Standard: "AFCA powers and procedures will be in accordance with the Rules in force at the time a complaint is received, which include our obligation to do what is fair in all the circumstances."

"Taking this into account, we will assess the conduct of the financial firm in light of the law, good industry practice and applicable codes of practice as in force at the time of the conduct, rather than retrospectively applying current law and standards."

"For example, a complaint about personal investment advice given in 2009 will be assessed against the legal obligations in force at the time, including the obligation for personal advice to have a reasonable basis, rather than the "best interest duty" which applies to personal advice given since July 2013."

Adviser obligations prior to 1 July 2013 are those that fall under Section 945A in the Corporations Act 2001: requirement to know your product, know your client, and provide appropriate advice.

Cases that occurred from 1 July 2013 will have to have "taken any other step at the time the advice is provided that is in the best interests of the client".

From 1 January 2020 onwards, FASEA's code of ethics standard will be applied in addition to the previous requirements.

Additionally, Singh said the issue of missing records is one of the biggest questions they've had; under licensing requirements, advisers are only required to keep records for seven years, meaning many won't have records for cases that now fall under the renewed timeframe.

He stressed the importance of documenting everything, but addressed how AFCA would treat complaints when there are no records because the seven year mark has passed.

The process is to first verify that is indeed the case. AFCA will ask a senior member of a firm to submit a statutory declaration, advising the steps they had taken to locate the records, and confirming the records no longer exist.

A lack of records does not necessarily mean one party or the other will lose, he said. Rather, they will look at other contemporaneous evidence, and what the consumer's recollection is of what occurred.

"We can just discount a case just because no records have been kept from the financial firm," he said, "so we have to look at it thoroughly to try to work out what's going on, and try to piece it together."

If the matter cannot be solved through conciliation, and AFCA has to move to make a decision, they will make an assessment "based on what they've seen."

Cases that were previously declined because of the time limit will be reviewed by the authority, which will be acting proactively to contact parties that can now make a dispute.

AFCA's expanded jurisdiction followed the introduction of the AFCA Scheme (Additional Condition) Amendment Authorisation 2019 which requires AFCA, for 12 months, to accept complaints about conduct dating back to 1 January 2008, the period examined by the Hayne Royal Commission.

In cases where financial firms and its customers have not found a resolution, AFCA will start investigating legacy matters from 1 October 2019.

Read more: AFCAShail SinghCorporations ActFASEAFinancial Planning Association of AustraliaHayne Royal CommissionSection 945A
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