How ASIC regulates financial advice

ASIC’s role in financial advice

ASIC is the regulator responsible for the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth). A digital copy of each Act can be obtained from the Federal Register of Legislation. These Acts regulate the conduct and disclosure obligations of financial services providers such as individual financial advisers and Australian financial services (AFS) licensees.

As the conduct and disclosure regulator, ASIC is focused on the behaviours of participants in the financial advice industry and the impact on consumers.

The Corporations Act 2001 imposes:

• a single licensing regime for financial sales, advice and dealings in relation to financial products,
• consistent and comparable financial product disclosure, and
• a single authorisation procedure for financial exchanges and clearing and settlement facilities.

The regulatory framework covers a wide range of financial products including securities, derivatives, general and life insurance, superannuation, margin lending, carbon units, deposit accounts and means of payment facilities.

How ASIC approaches financial advice misconduct

Types of regulatory actions

ASIC has a range of regulatory tools we can use when addressing misconduct involving financial advice. These are broadly grouped under three types of action: civil, criminal and administrative. We may use remedies in combination or standalone.

For AFS licensee misconduct, we may use the following administrative tools:

1. immediately suspending or cancelling an AFS licence in certain limited circumstances
2. suspending or cancelling an AFS licence after offering a hearing
3. varying AFS licence conditions after offering a hearing, including by imposing additional licence conditions or removing licence authorisations
4. issuing an infringement notice, and
5. for AFS licensees who are market participants, referring alleged breaches of the market integrity rules to the Markets Disciplinary Panel.

For providers of financial services, we may also take administrative action by banning that person from providing financial services, controlling, or being an officer of a financial services business (via a banning order), either immediately, in certain limited circumstances, or after offering a hearing.

We may also consider referring matters to the Financial Services and Credit Panel or issuing warnings or reprimands.

ASIC also has a power to accept an enforceable undertaking. For more information, see Regulatory Guide 100 Enforceable undertakings (RG 100) and Information Sheet 28 About the enforceable undertakings register (INFO 28).

ASIC may also, if we consider it appropriate, give information to a licensee about a person (see section 916G of the Corporations Act 2001). However, we may only give this information if:

• it is about a person who we believe is, or will be, a representative of that licensee, and
• we believe, on reasonable grounds, that the information is true.

For more information, see Information Sheet 250 Giving AFS and credit licensees information about their representatives (INFO 250).

ASIC publishes the outcomes of our regulatory action taken in relation to misconduct involving financial advice. For more information, see Information Sheet 152 Public comment on ASIC’s regulatory activities (INFO 152).

ASIC’s enforcement approach is explained in Information Sheet 151 ASIC’s approach to enforcement action (INFO 151).

When would ASIC ban an adviser?

• ASIC is likely to take administrative action in instances where there is a need to protect investors and consumers, to deter misconduct, or where the person’s conduct may result in investor or consumer detriment. Whether administrative action will be taken will depend on the facts of each matter. In general, ASIC may consider banning a person from providing financial services, controlling, or being an officer of a financial services business where we have concerns about the person, or the way their business is being or has been conducted.
• ASIC may ban a financial services provider even if the person has rectified breaches or has taken steps to prevent further non-compliant conduct, such as by completing additional training. We may do so to deter misconduct by the provider or others. In deciding whether to do so we will consider, among other things, whether the person has been reactive rather than proactive in their approach to compliance. The person’s attitude to compliance is an example of a factor we will take into account when forming a view about whether they have a reactive or proactive compliance approach.
• For a list of key factors ASIC may consider in making a banning order, see Table 2 in Regulatory Guide 98 ASIC’s powers to suspend, cancel and vary AFS licences and make banning orders (RG 98).
• For more information about the principles and procedures we adopt in conducting administrative hearings please see Regulatory Guide 8 Hearings practice manual (RG 8).