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11-52MR ASIC accepts legally enforceable undertaking from UBS Wealth Management Australia
ASIC has accepted a binding commitment in the form of an enforceable undertaking (EU) from UBS Wealth Management Australia Ltd (UBS WMA) to modify key aspects of its compliance culture and frameworks and remedy past compliance failures in the provision of financial advice to retail clients.
UBS WMA is a subsidiary of UBS AG and operates a financial services business in Australia which includes the provision of financial product advice.
ASIC’s Chairman, Tony D’Aloisio, said, ‘The EU has enabled ASIC to achieve three things in a timely manner. First, the EU provides a speedy process of redress and compensation for UBS WMA clients who suffered loss because they were not provided with an adequate Statement of Advice. Secondly, it gives the executives and Board of UBS WMA a clear timetable within which to make improvements in the conduct of its advice business. Thirdly, it sends a broader message to the market that ASIC expects advisers to have proper systems in place to comply with the provisions of the Corporations Act relating to Statements of Advice.’
Between January 2006 and 31 March 2010, UBS WMA failed to provide Statements of Advice to 764 retail clients who invested in a category of financial products classified by UBS WMA as structured products. The failure to provide Statements of Advice also extended to retail clients who invested in additional classes of financial products.
The EU offered by UBS WMA sets out how it intends to rectify these issues and how it will establish a claims process for clients who potentially received personal financial product advice in circumstances where a Statement of Advice was required but was not provided in accordance with the Corporations Act.
Under the EU, UBS WMA will write to the relevant clients and provide them with a claim form, which will facilitate any claim for compensation that the clients may be entitled to make, arising from the fact that UBS WMA failed to provide the required Statement of Advice.
The EU also requires UBS WMA to complete a program to address its failure to foster and maintain a proper commitment to, and culture of, compliance within its business, and to remedy compliance deficiencies. The program will be thoroughly reviewed by an independent expert who will regularly report to ASIC and the final expert’s report will be provided within 14 months, following which UBS WMA will implement any final requirements.
UBS WMA’s remediation plan will address ASIC’s concerns set out in the EU including:
- a poor compliance culture and framework, meaning that deficiencies in processes were not identified, escalated or remedied in an appropriate or timely manner;
- inadequate risk management;
- inadequate training and education;
- deficiencies in the production of Statements of Advice for investors; and
- inadequate breach assessment and reporting.
ASIC acknowledges that UBS WMA has cooperated throughout its investigations and has already responded to the deficiencies including by undertaking a business restructure with the appointment of a number of senior executives to the business.
In the event that UBS WMA fails to comply with the requirements of the EU or the expert determines that UBS WMA has failed to complete the remediation program, and such failures are significant, ASIC will assess whether it should take action to vary the conditions of UBS WMA’s Australian financial services licence (AFS licence).
The EU relates to UBS WMA only and does not include the parent company UBS AG or other UBS group entities.
ASIC’s priorities include an extensive ongoing surveillance program of financial advisers. In December 2010, Professional Investment Services Pty Ltd (PIS), one of Australia’s largest providers of financial services, entered into an EU in relation to the company’s compliance with financial services laws. ASIC was concerned that PIS may have failed to comply with its obligations as an AFS licence holder based on the results of surveillance conducted by ASIC.
In 2011, ASIC will be focusing on the following financial advice themes:
- aggregator licensees;
- quality of advice;
- advice relating to complex products such as capital guaranteed products; and
- the use of managed discretionary accounts (MDAs).
An important aspect of ASIC’s work in assisting and protecting retail investors and consumers is ensuring and promoting compliance by licensees with financial services laws.