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Wednesday 7 January 2015

15-003MR ASIC imposes conditions on Guardian Advice licence

ASIC has imposed conditions on the Australian financial services (AFS) licence of Suncorp-owned Guardian Advice following a surveillance which uncovered deficiencies in the advice it provided to retail clients.

ASIC was also concerned the company, which specialises in life insurance advice, was not complying with its general obligations as an AFS licensee, including failing to properly supervise its authorised representatives.

Under the conditions, Guardian Advice must appoint an ASIC-approved independent consultant to review its compliance with its general licensee obligations and develop a plan to rectify any deficiencies identified by the expert. The expert will report regularly to ASIC over the next two years on Guardian Advice’s implementation of the plan, and ASIC may publish the results of the reports.

ASIC Deputy Chairman Peter Kell said, ‘The weaknesses in Guardian Advice’s systems and controls show that there was an ongoing risk that unsuitable advice could be provided by Guardian Advice and its authorised representatives.’

The licence conditions imposed on the company, which has 130,000 clients across the country, follow an ASIC review of the life insurance industry that found the need for higher standards to ensure the interests of consumers are given priority (refer: 14-263MR).

ASIC acknowledges the cooperative and constructive approach that Guardian Advice has taken in response to the concerns raised by ASIC.

Mr Kell said, ‘This outcome underlines ASIC’s strong commitment to lifting standards in the life insurance sector. When we come across instances that raise issues for the confidence consumers have with advice, we will take action.’

ASIC’s surveillance across Guardian Advice’s business found instances where there was not a demonstrated reasonable basis for the advice provided and also files that did not evidence the advice given was in the best  interests of clients.

It also found Guardian Advice did not have adequate arrangements in place to ensure it was complying with its general obligations as an AFS licensee. Specifically, ASIC was concerned that Guardian Advice did not:

  • properly assess and monitor its representatives’ competence to provide financial services
  • have adequate measures in place to meet its record-keeping obligations
  • adequately respond to identified breaches by its representatives, and
  • have in place adequate human and technological resources

As a result, ASIC has ongoing inquiries and, where inappropriate advice was provided, will consider enforcement action or other regulatory action such as bannings of individual advisers.

Background

ASIC’s surveillance followed Guardian Advice’s appointment of a number of ex-representatives of AAA Financial Intelligence Limited (AAA FI) and AAA Shares Pty Ltd (AAA Shares) after ASIC cancelled their AFS licences in February 2013 (refer: 13-019MR). ASIC was interested to ensure Guardian Advice had in place adequate monitoring and supervision processes to deal with these representatives.

As of January 2015 Guardian Advice has 257 authorised representatives.

ASIC has previously warned the market about the need to ensure they have robust recruitment processes, especially when appointing representatives who have worked for a business against which ASIC has taken action (refer: 13-097MR).

ASIC’s surveillance of Guardian Advice was not, however, confined to advice from ex-AAA representatives or life insurance advice. ASIC conducted a broad surveillance across the business looking at advice from a number of representatives and at a number of features of Guardian Advice’s business.

Guardian Advice was one of the firms included in ASIC’s life insurance review.

Last updated: 23/03/2016 03:16