Lessons learned from Report 515: Taking ‘reasonable steps’ to ensure your representatives comply with the financial services laws

  • ASIC’s Report 515 provides an update on the actions of the largest advice institutions to address customer loss or detriment.
  • It is intended to assist the financial advice industry as a whole to raise its standards and reduce the risk.
  • This article provides seven key lessons and suggestions of what you can do to meet ASIC's expectations or achieve higher standards.

People reviewing a report

ASIC’s report 515 is directly relevant to companies in the financial services industry. However, principles of good governance that are the subject of the report apply to all companies, and there is much to be learned from the report, whatever your industry.

Simply find and replace ‘financial advice’ with the product or service that your company delivers when reading this article. There are many laws that are specific to the financial services industry that don’t apply outside of it so you should not read references to specific financial services laws as applying to your company unless you are in the financial services industry.

Does your firm:

  • act professionally, avoid conflicts of interest and treat customers fairly?
  • deliver strategic financial advice that is aligned with customers' needs and preferences; and
  • ensure that customers are fully compensated when loss or detriment results from poor conduct?

These are the elements that ASIC deems necessary to promote investor and consumer trust and confidence and market integrity in the financial advice industry. Perhaps your firm does all of the above. However, ASIC’s review of five of Australia’s largest banking and financial institutions between 1 January 2009 and 30 June 2015 showed many instances of the above elements not being met. The review resulted in serious compliance concerns about 185 advisers and ultimately, a total of $30million in compensation to approximately 1,347 customers.

In July 2015, ASIC commenced a project to review how effectively these large financial services institutions were overseeing their financial advisers. In March 2017, ASIC released Report 515 which outlines its observations and findings from the project. The Report sets out ASIC’s expectations around compliance in areas such as breach reporting, adviser file audits, supervision and monitoring through data analytics, background checks, remediation and culture in financial advice business. It is ASIC’s aim that the report will assist the financial advice industry as a whole to raise its standards and reduce the risk of current customers receiving non-compliant advice in the future.

So if you have any doubts that your firm is not doing all of the above or if you simply want to strive to achieve even higher standards, read on. There are always lessons to be learned.

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