Financial advisers could face the same rigid license registration requirements as doctors and lawyers if the Royal Commission's recommendations on compliance and further education in the industry become law.
Commissioner Kenneth Hayne is calling for the ASIC Financial Advisers Register (FAR) to be formalised and for the mandatory individual registration of all advisers.
Under his recommendation, financial advisers will need to comply with their Continuing Professional Development (CPD) requirements before they can renew their registration.
He also called for a single, central disciplinary body to ensure advisers are penalised for misconduct if their own licensee fails to do so.
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Taking on the cases outside ASIC's remit, the body could impose sanctions on advisers who fail to meet the new professional standards - or risk losing their registration.
"There's more on the line for the adviser and one can assume that they will be more compliant as a result, not just with the standards that are expected of them but also with the law itself," Holley Nethercote partner Jesse Vermiglio says.
"The disciplinary action doesn't have the same effect unless it is tethered to the registration component, which is essentially their livelihood."
The licensee won't be relieved from their compliance and monitoring duties. However, AFSL holders would be required to report serious compliance concerns to the proposed disciplinary body.
Under this framework, Hayne's report overlaps with existing - though yet to be enforced - legislation surrounding the Financial Adviser Standards and Ethics Authority's Code of Ethics. FASEA's code requires advisers to report misconduct and breaches. It also requires them to be a member of a code monitoring body by 15 November 2019.
Hayne is non-prescriptive in regards to the relationship a new body would have with these code monitoring bodies - applications for which are currently being accepted by ASIC - though he does hint at the possibility of them already being superseded.
"It may be that this body is the most appropriate entity to perform the functions currently planned to be assigned to the code monitoring bodies under the Corporations Act," Hayne writes.
However, Financial Planning Association of Australia chief executive Dante De Gori has a different take.
He says there is no reason why a code monitoring body couldn't act as the disciplinary body. Code Monitoring Australia was established in late 2018 by the FPA and five other industry associations as a separate legal entity and has already applied to ASIC for approval.
"The powers that code monitoring bodies will have are a lot more powerful than any association has today... And it is already legislated that you must be registered with one to practice and if you breach the code you can lose that registration," he says.
CMA, however, is backed by the associations and is a wholly-owned subsidiary of the FPA, raising concerns of a potential conflict.
"In my view, it is unlikely the new body would be an industry association or a body associated with one," Vermiglio says.
"For the body to be credible and to play a role in lifting the standards of advisers, it must not only be independent of industry but also be seen to be independent of industry."
Commissioner Hayne notes in the report that both De Gori and Association of Financial Advisers chief executive Phil Kewin testified to the Royal Commission that the primary function of an association is to promote and advance the cause of its members and the profession.
"These characteristics sit uncomfortably with those of effective discipline that include objectivity, consistency and compulsion," Hayne writes, citing the FPA's dealings with former adviser Sam Henderson as an example.
The Government said it would introduce a new disciplinary system but did not specify the terms.
They did agree to the need for individual registration; a standard practice among many other professions. Federal Treasurer Josh Frydenberg said the Government is confident its actions will put in place the legislative framework necessary to provide regulators with the powers and the resources to hold those who abuse the community's trust to account.
This news story was first published in the latest print issue of Financial Standard. You can view the entire edition on our free iPad app.