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21-180MR ASIC releases reference checking and information sharing protocol for financial advisers and mortgage brokers
ASIC has made the ASIC reference checking and information sharing protocol (ASIC Protocol) that will give effect to the Financial Services Royal Commission’s recommendations to improve reference checking in the financial advice and mortgage broking industries. ASIC has also released guidance documents that will help Australian financial services (AFS) and credit licensees comply with their new reference checking obligations.
The Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (the Act) introduces obligations on AFS licensees and Credit licensees to comply with an ASIC Protocol in relation to reference checking. The Act, and the ASIC Protocol, commence on 1 October 2021.
The ASIC Protocol sets out obligations for licensees to undertake a reference check and share information on an individual seeking to be employed or authorised as a financial adviser or mortgage broker.
The reforms will promote better information sharing about the performance history of financial advisers and mortgage brokers—focusing on compliance, conduct and risk management.
To help licensees comply with the new reference checking requirements, ASIC has prepared an information sheet and published examples of references as a guide. Consequential updates to existing ASIC guidance have also been made to reflect the new requirements.
In finalising the ASIC Protocol, ASIC took into account industry feedback on the proposals in Consultation Paper 333 Implementing the Royal Commission Recommendations: Reference checking and information sharing (CP 333), which was released in November 2020.
ASIC has also released Report 694, which highlights the key issues raised in submissions to ASIC on CP 333 and details ASIC’s responses on those issues.
- ASIC Corporations and Credit (Reference Checking and Information Sharing Protocol) Instrument 2021/429 and Explanatory Statement
- Information Sheet 257 ASIC reference checking and information sharing protocol (INFO 257)
- Example references for a financial adviser and mortgage broker
- Report 694 Response to submissions on CP 333 Implementing the Royal Commission recommendations: Reference checking and information sharing (REP 694)
The Royal Commission found that AFS licensees were not doing enough to communicate between themselves about the background of prospective employees. To address these issues, 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 accepted the Royal Commission recommendations on reference checking, and the Act which implemented these recommendations received Royal Assent on 17 December 2020.