The federal government has released draft legislation outlining the function of ASIC's Financial Services and Credit Panel as the single disciplinary body for financial advisers.
The government is proposing the ASIC FSCP exercise the functions of the single disciplinary body for financial advisers, proposing new penalties and sanctions for those who have breached their obligations. It will also apply for actuaries, stockbrokers and insurers where they are providing personal financial advice.
The draft legislation also introduces the highly anticipated annual registration regime and a single disciplinary and registration system for financial advisers who also provide tax (financial) advice services, removing the requirement for tax (financial) advisers to be registered with the Tax Practitioners Board. It also ensures relevant tax experts are appointed to the FSCP to hear disciplinary matters that involve tax-related advice, the government said.
Under the proposed law, ASIC must convene a FSCP "if it reasonably believes that a financial adviser has breached their obligations under the Corporations Act, and for which ASIC does not make, or propose to make, a banning order". The panel may also issue an infringement notice or recommend ASIC seek a civil penalty and/or impose administrative sanctions.
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Broadly, there are six circumstances under which a matter may be referred to the FSCP. These include where an adviser is in a position that compromises their ability to practice as a financial adviser, such as being insolvent or convicted of fraud. They may also have contravened a financial services law, or have breached the education and training requirements or the Code of Ethics.
Advisers involved in someone else's breach of a financial service law will also be referred, as will those who provide advice while unregistered and those who fail to follow a previous sanction applied by the FSCP. Advisers who fail to respond to a determination made by the Australian Financial Complaints Authority (AFCA) may also be referred.
Details of any disciplinary action against an adviser by the FSCP may also be published on the ASIC Financial Adviser Register, including warnings, reprimands, directions to undertake specified training, counselling or supervision, orders suspending or prohibiting registration, and infringement notices.
The announcement follows the decision to dissolve the Financial Adviser Standards and Ethics Authority (FASEA), to occur from 1 January 2022. The creation of the single disciplinary body does not change ASIC's ability to impose banning orders, however ASIC may delegate its banning powers to the FSCP, a Q&A on the draft legislation reads.
The draft legislation also introduces a new annual registration system for advisers, though does not confirm the fee that will apply to the annual process.
All licensees will be able to register existing advisers from 1 January 2022 and have until 1 January 2023 to ensure all advisers are registered. From 1 January 2023, no new adviser will be able to practice until their licensee has confirmed their registration.
While licensees are not answerable to the FSCP under the proposed laws, licensees may incur sanctions where they provide incorrect or misleading information in relation to an adviser's registration. They will also face sanctions where they continue to authorise unregistered advisers. Where the licensee is also the authorised adviser, they will face discipline by both ASIC and the FSCP.
"These reforms simplify the regulatory framework governing the provision of financial advice by streamlining the number of bodies involved in the oversight of financial advisers, while at the same time strengthening that oversight to ensure that advisers engaged in misconduct are appropriately disciplined under one system," minister for financial services and superannuation Jane Hume said.
The consultation period is now open and will run until Friday, May 14.