ASIC stresses the need to properly supervise staff amid crackdown

ASIC has signaled that it is taking a tougher line against credit and financial services licence holders that do not properly supervise and monitor the conduct of their staff.

The regulator last month suspended the credit license of a Melbourne mortgage broking business until June 2014 and its sole responsible manager for three years. ASIC said the manager had “failed to adequately supervise and monitor the activities” of its staff.

ASIC also said the manager had “failed to adequately understand” the licensee’s obligations.

The business, which was found to have submitted several home loan applications with false information, is the eighth credit provider to be banned by ASIC since November.

The spate of bans highlights the need for AFSL and credit license holders to have adequate systems, procedures and training in place to ensure their staff – and not only the responsible managers – act within the law.

ASIC has issued several Regulatory Guides to help AFSL and credit licensees understand their obligations with representatives, including RG 104, RG 146 and RG 205.

However, critical questions for licensees should include:

  • How are your staff actually supervised and monitored? For example, do you have regular performance development reviews? Do employees know what is expected of them in their roles, and are they regularly reminded of this through ongoing training? Is someone responsible for making sure that relevant staff members actually complete each training program? Is there a review process for ensuring that staff are doing what they should be doing, such as sample file or call reviews? Are managers being provided with adequate assurance, through ongoing reporting, that these processes are being followed?
  • Are your Responsible Managers keeping up to date with the areas that they are responsible for? Have you documented what your Responsible Managers are responsible for?  Are they maintaining their expertise in this area through ongoing professional training?  Has someone captured whether this training has actually been completed?

FOFA…. It’s still the law!

The Federal Government’s proposed amendments to the Future of Financial Advice (FOFA) legislation could take some months to pass given the recent reports that the changes will be blocked by Labor and the Greens in the Senate until mid-2014.

ASIC has meanwhile announced that it will not take enforcement action on the areas of the Future of Financial Advice (FOFA) legislation that the Federal Coalition Government plans to repeal.

This means the regulator will not target the areas of the FOFA reforms that the Assistant Treasurer, Arthur Sinodinos, last week said the Government would wind back.

Among the FOFA reforms imposed by the previous Labor Government, that “went too far in imposing red tape and additional costs”,  include the “opt-in” requirement for clients to sign in order to renew their fees with their adviser every two years.

ASIC has also stated it will not take action for breaches of section 962S of the Corporations Act 2001, that requires fee disclosure statements to be provided to retail clients with ongoing fee arrangements entered before 1 July 2013.

However, pending changes to the law, licensees would be well advised to continue complying with the FOFA requirements in question. Despite ASIC stating that it will not take enforcement action, these FOFA requirements are currently the law, which could still form the basis for an aggrieved investor to take legal action against any non-complying licensee.

How CompliSpace can help

Australian Financial Services Licence holders are inundated with a raft of corporate governance obligations and an ever-growing compliance burden, which can easily distract focus away from core business activities.

CompliSpace delivers industry specific web-based policies, programs and procedures that can be quickly tailored and configured to suit an organisation’s needs and are kept up-to-date with legal and regulatory changes by our team of specialists.

Our team of compliance professionals and lawyers combine extensive expertise with practical technology-enabled solutions to simplify the complexity of the regulatory environment and allow our clients to focus on allocating resources toward improving financial performance.

P: 1300 132 090



This blog is a guide to keep readers updated with the latest information. It is not intended as legal advice or as advice that should be relied on by readers. The information contained in this blog may have been updated since its posting, or it may not apply in all circumstances. If you require specific or legal advice, please contact us on (02) 9299 6105 and we will be happy to assist.

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