Second chances: Harder for advisers?

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ASIC has issued a warning to financial services licensees, asking them to ensure they have ‘robust’ recruitment processes in place when appointing representatives who have worked for a business it has taken action against.

ASIC Deputy Chairman, Peter Kell, says the warning follows recent action against licensees, including financial advisers and securities dealers, then ASIC becoming aware many of their representatives have moved to new licensees.

“More broadly, we are seeing significant industry restructuring at present and it is vital that recruitment standards are high in such an environment,” says Kell.

“Generally, licensees have good compliance and governance standards and ensure representatives go through rigorous checking before taking them on. However, we want to make sure that all licensees are fully aware of the need to do this. The reputation of a firm can painstakingly be built over a number of years but seriously damaged overnight through poor representatives.”

In many cases, he says, representatives of licensees which have come under ASIC fire will be adequately trained, competent and comply with the financial services law.

“However, where representatives have come from an environment in which there was a culture of poor compliance or poor quality advice, appointing licensees need to take extra care to satisfy themselves that representatives are properly trained and monitored to address early any issues that might arise.

“ASIC urges all licensees to review their current approach to appointing representatives and make sure processes are robust. Licensees must have in place adequate compliance and governance standards. This includes being responsible for the conduct of representatives they appoint.”

Kell says licensees must:

  • Ensure migrating representatives are competent and adequately trained. It is important that they are effectively screened and their background checked
  • Have adequate supervisory arrangements in place to identify and address deficiencies quickly
  • Have adequate financial, technological and human resources to supervise and monitor new representatives, especially in cases of business growth

“Monitoring and supervision are much more than audits and compliance checks. They are about proactively ensuring that advice is appropriate and clients are treated fairly," he adds. “ASIC is continuing to closely scrutinise licensees’ obligations to demonstrate adequate monitoring and supervision and will not hesitate to take action where we find those practices deficient.”

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