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16-311MR ASIC releases guidance on review and remediation
ASIC has released guidance on review and remediation conducted by Australian financial services (AFS) licensees providing personal advice to retail clients.
The guidance reflects work done with industry over the past several years where ASIC has worked with advice licensees with large remediation programs to shape the scope and nature of remediation arising from systemic advice issues.
The key principles set out in the guidance are:
- review and remediation is likely to be appropriate where a systemic issue has occurred that may have caused loss or detriment to clients
- the scope of review and remediation should ensure it covers the right advisers, the right clients and the right timeframe
- the process of review and remediation should be comprehensive, timely, fair, and transparent. There should be clearly defined principles to guide the process and an appropriate governance structure
- effective, timely and targeted communication is key to ensuring that clients understand the review and remediation and how it will affect them; and
- clients should have access to an EDR scheme if they are not satisfied with the remediation decision made.
'ASIC wants to ensure that advice licensees proactively address any systemic problems caused by their conduct and, where necessary, put processes in place to remediate their clients for loss suffered in a way that is timely, fair and transparent,' ASIC Deputy Chairman Peter Kell said.
'Advice firms that take effective and timely steps to fix problems if something goes wrong will be much better placed to retain the trust and confidence of their clients,' said Mr Kell
In the 2015-16 financial year, ASIC secured over $200 million in compensation and remediation for financial consumers and investors across the areas it regulates.
While the guidance is directed at licensees who provide personal advice to retail clients, review and remediation takes place in many other sectors of the financial services industry. The principles set out in the guidance should be applied to other review and remediation where relevant.
ASIC will shortly release an amendment to Class Order [CO 14/923] Record-keeping obligations for Australian financial services licensees when giving personal advice together with a report summarising the key feedback ASIC received in response to CP 247, and our response to that feedback.
ASIC announced on 6 May 2015 that it would develop regulatory guidance on advice licensees conducting review and remediation (refer: 15-101MR).
On 16 December 2015, ASIC released CP 247 seeking feedback on proposed guidance on review and remediation conducted by AFS licensees that provide personal advice. The consultation paper also sought feedback on clarification to the record-keeping requirements for AFS licensees relating to the best interests duty.
Submissions received were generally supportive of ASIC issuing guidance on review and remediation. Submissions were also generally supportive of ASIC’s proposed amendments to the AFS licensee record-keeping requirements when providing personal advice.