In his final report on financial advisers Gary Kleyn considers the changes being made to the industry’s regulatory environment.
THE fallout from the WA mortgage brokers’ scandal and demands for greater scrutiny and new regulations have made it a tough past 12 months for financial advisers.
The unrolling of the Financial Services Reform Act and its rigorous new education and licensing requirements have culled the number of advisers operating in WA. In addition, the government regulator, the Australian Securities and Investment Commission, has been vigilant in its policing of the new laws.
Last week ASIC issued another warning to financial service providers noting that, with just 12 months remaining before licences became compulsory for all providers, the countdown for compliance was on.
“If you want to operate beyond March 10 2004 the message is clear,” ASIC financial service regulation executive director Ian Johnston said. “You need to apply for your AFS licence soon. We cannot give a general extension to the FSR transition period.
“We can only grant an extension in exceptional individual circumstances.”
However, ASIC said most of the industry was yet to make the transition to the new regime.
State director of the Association of Financial Advisers, Wayne Clarkson, said adviser numbers already had declined. Many were choosing to retire or move into other industries because they found the education and licensing requirements too onerous.
The regulation is being coupled with additional powers provided to ASIC through the reform process.
In the past two years, ASIC reports that it has removed 62 financial advisers from the industry, and sent a further 10 to prison.
Following an unfavourable report released last month by ASIC in conjunction with The Australian Consumer Association, the com-mission has promised further policing measures aimed at financial advisers.
ASIC has committed to checking for inappropriate advice within firms specialising in tax-driven high commission products.
Internal dispute resolution procedures will be examined while the presence of higher commissions for recommended in-house products without proper disclosure will also be reviewed.
The latest adviser to have received the attention of ASIC was Michael Curtis, who was previously an authorised representative of Colonial Financial Services. He worked as a financial adviser between 1994 and February 2002. An ASIC investigation found that Mr Curtis had transferred the superannuation funds of approximately 73 clients between Colonial investment products to maximise the commission that he would receive.
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