ASIC today released a consultation paper seeking feedback on a new reference checking and information sharing protocol for financial advisers and mortgage brokers.
Mandating reference checking for financial advisers and mortgage brokers was a recommendation of the Financial Services Royal Commission (Royal Commission)(see Background).
The Government accepted the Royal Commission recommendations on reference checking and, on 12 November 2020, introduced the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 (the Bill) into Parliament.
The Bill includes obligations on Australian financial services (AFS) licensees and Australian Credit (credit) licensees to comply with an ASIC reference checking and information sharing protocol (ASIC Protocol).
ASIC has developed a draft ASIC Protocol, which sets out obligations for licensees in relation to undertaking a reference check on an individual seeking to be employed or authorised as a financial adviser or mortgage broker. ASIC has also prepared a draft information sheet to help licensees understand their reference checking and information sharing obligations.
ASIC is now consulting on both the draft ASIC Protocol and the accompanying information sheet through Consultation Paper 333 Implementing the Royal Commission recommendations: Reference checking and information sharing (CP 333).
The draft ASIC Protocol and information sheet have been prepared based on the Bill. If the Bill is amended by Parliament, ASIC will make any necessary changes to the final ASIC Protocol and information sheet following consultation.
Industry and other interested stakeholders have until 29 January 2021 to provide feedback on CP 333. ASIC will consider the feedback and finalise the ASIC Protocol and information sheet before the new reference checking and information sharing obligations in the Bill commence on 1 October 2021.
The Royal Commission found that AFS licensees were not doing enough to communicate between themselves about the background of prospective employees. In its final report, the Royal Commission recommended that AFS licensees undertake reference checking and information sharing for financial advisers to the same effect of the Australian Banking Association’s (ABA) Reference Checking and Information Sharing protocol. It also recommended that the same obligation should apply to credit licensees in respect of mortgage brokers. (See Recommendations 1.6 and 2.7 of the Royal Commission Final Report).
The Government introduced the Bill into Parliament in response to these recommendations.