The regulator has warned financial services licensees to ensure they have robust recruitment processes in place when appointing representatives.
Particularly, the Australian Securities and Investments Commission (ASIC) wants licensees to be on their guard when employing advisers who have worked for a business ASIC has previously taken action against.
The warning follows recent ASIC action against licensees, including financial advisers and securities dealers, with 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,” said ASIC commissioner and deputy chairman Peter 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, representatives of licensees against which ASIC has taken action will be adequately trained and 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.”
The regulator’s warning also highlights a broader industry issue around recruitment risk.
Communication key
Fiona Navarro, general manager of dealer group Apogee Financial Planning, believes it is a conversation that is long overdue.
“I don’t think that licensees communicate enough to each other around these sorts of experiences,” she said. “Obviously there are privacy issues but we still have advisers who go from one licensee to another and who might replicate bad behavior. It would good to talk about it as an industry.”
It is a point picked up by Kell.
“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 said.
“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.”
Kell also reminded licensees of ASIC’s new powers under FoFA.
‘The powers allow us to restrict or remove from the industry firms and individuals who might cause or contribute to investor losses,” he said.