Warnings and reprimands

From 1 January 2022, ASIC must give financial advisers a written warning or reprimand in specified circumstances.

Note: In this information sheet, a financial adviser means a ‘relevant provider’ – broadly, an individual who is authorised to provide personal advice to retail clients about relevant financial products: see section 910A of the Corporations Act 2001 (Corporations Act).

This information sheet (INFO 270) explains:

The requirement to give a warning or reprimand was introduced by the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021 (Better Advice Act). The Better Advice Act implements the Government’s response to Recommendation 2.10 of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

What are warnings and reprimands?

A warning or reprimand is a letter sent by ASIC to a financial adviser to warn or reprimand them where ASIC reasonably believes that specified circumstances (the warning or reprimand circumstances) exist.

The letter will contain a statement of reasons for ASIC’s decision to give the warning or reprimand: see section 921S(3) of the Corporations Act. ASIC can give either a warning or a reprimand to address a specified circumstance, not both.

Generally, a warning will warn a financial adviser against continuing the conduct or circumstances that led to us giving the warning, whereas a reprimand will admonish the financial adviser in relation to the conduct or circumstances that have already ceased.

The procedural requirements we follow are the same for warnings and reprimands. For example, in both cases we must:

  • provide a copy of the warning or reprimand to the financial adviser’s Australian financial services (AFS) licensee(s), and
  • provide a statement of reasons.

We may also be required to give procedural fairness to a financial adviser.

When ASIC will give a warning or reprimand

Not every concern brought to ASIC’s attention which indicates that one of the warning or reprimand circumstances may exist will lead to ASIC giving a warning or reprimand.

We will still conduct our usual triage, investigatory work and referral process. If, at the end of this process, ASIC (or our delegate) has formed a reasonable belief that a warning or reprimand circumstance exists in relation to a financial adviser, we must:

  • exercise one of our other powers under the corporations legislation (e.g. to impose a banning order or accept an enforceable undertaking)
  • convene a sitting panel of the Financial Services and Credit Panel (FSCP), or
  • give the financial adviser a warning or reprimand.

From 1 January 2022, ASIC must convene a sitting panel of the FSCP in the circumstances prescribed in regulation 12N of the Australian Securities and Investments Commission Regulations 2001 (ASIC Regulations).

Note: For our proposed guidance on these circumstances, see the draft update to Regulatory Guide 263 Financial Services and Credit Panel (RG 263), which is Attachment 1 to Consultation Paper 359 Update to RG 263 Financial Services and Credit Panel (CP 359), at draft RG 263.12–RG 263.14.

In other circumstances relating to less serious misconduct (warning or reprimand circumstances), ASIC is not required to convene a sitting panel but we must give a warning or reprimand if we do not propose to exercise our other enforcement powers or convene a sitting panel of the FSCP: see section 921S of the Corporations Act.

Circumstances where ASIC must give a warning or reprimand

The warning or reprimand circumstances are set out in Table 1.

Table 1: Warning or reprimand circumstances

Circumstance

Description

Contravention of financial services law that we do not believe to be serious

A financial adviser has contravened, or been involved in the contravention of, a financial services law and ASIC does not reasonably believe the contravention is ‘serious’ (within the meaning of regulation 12N of the ASIC Regulations).

Note: We propose to provide guidance in RG 263 on the factors we will consider when assessing whether contraventions of financial services laws are serious: see CP 359.

Refusal or failure to implement an AFCA determination

A financial adviser has, at least twice, been linked to a refusal or failure to give effect to a determination made by the Australian Financial Complaints Authority (AFCA) where:

  • ASIC does not reasonably believe that the refusal or failure has resulted in material loss or damage to a client or a material benefit to the adviser, and
  • the failure does not appear to involve dishonesty or fraud.

Note: A financial adviser may be linked to a refusal or failure to give effect to a determination made by AFCA if they are an officer of the entity that is an AFCA member or they are substantially or significantly involved in the management of the financial services business carried on by the entity: see section 910C of the Corporations Act.

Officer of corporations that are unable to pay their debts

A financial adviser has been an officer of two or more corporations unable to pay their debts: see section 920A(1C) of the Corporations Act.

Non-compliance with a TPB order

A financial adviser has not complied with an order made by the Tax Practitioners Board (TPB) under section 30-20 of the Tax Agent Services Act 2009 as in force immediately before 1 January 2022. Such orders may, for example, relate to continuing professional development or supervision requirements: see section 1684T(4) of the Corporations Act.

Timeframe of the conduct or circumstance

ASIC can only give a warning or reprimand for conduct engaged in, or circumstances arising, on or after 1 January 2022: see section 1684K of the Corporations Act.

How ASIC will communicate a warning or reprimand

Letter sent to financial adviser

As noted earlier, a warning or reprimand will be in the form of a letter sent to a financial adviser, and will contain a statement of reasons for ASIC’s decision to give the warning or reprimand. The letter will usually be sent electronically.

Copy given to AFS licensee(s)

At the same time that ASIC gives the warning or reprimand, and statement of reasons, to the financial adviser, we must also give a copy to the AFS licensee(s) that currently authorises the financial adviser to provide personal advice to retail clients on relevant financial products: see section 921S(2) of the Corporations Act.

ASIC’s obligation to notify the financial adviser’s current authorising AFS licensee(s) applies regardless of whether the circumstances occurred during the course of the financial adviser’s authorisation with that licensee.

If the financial adviser is authorised by more than one AFS licensee at the time ASIC decides to give a warning or reprimand, we must give a copy to each AFS licensee.

Publication

Warnings and reprimands will not be recorded on the Financial Advisers Register and ASIC will generally not publish the names of the financial advisers who we warn or reprimand.

However, we may consider publishing names if, for example, the financial adviser’s link to the conduct is already public knowledge.

We will also publicly report on the warnings and reprimands we give.

Note: ASIC must provide information about the warnings and reprimands we give under section 921S in our annual report: section 136(1)(da)(iii) of the Australian Securities and Investments Commission Act 2001.

When ASIC will provide procedural fairness

Before ASIC gives a warning or reprimand, and gives a copy to the financial adviser’s AFS licensee(s), we must consider providing procedural fairness to any person that will be directly and materially adversely affected if the warning or reprimand is issued.

We expect that, typically, the financial adviser who ASIC proposes to warn or reprimand will be entitled to procedural fairness. Among other reasons, this is because ASIC must give a copy of the warning or reprimand to the adviser’s AFS licensee(s). We consider that this could, in certain circumstances, have a direct, adverse effect on the adviser’s interests, including their reputation and livelihood.

We will, however, decide whether a financial adviser is entitled to procedural fairness on a case-by-case basis.

When providing procedural fairness, we will generally offer the financial adviser the chance to make a written submission about the proposed giving of the warning or reprimand. We will consider the submission before deciding whether to give a warning or reprimand.

Note: For more information on the obligation to provide procedural fairness, see Regulatory Guide 103 Confidentiality and release of information (RG 103).

Financial adviser’s right of review

Decisions by ASIC to give warnings or reprimands are reviewable by the Administrative Appeals Tribunal (AAT).

Financial advisers will be notified in writing of their right to have the AAT review ASIC’s decision.

Where can I get more information?

For more information, see:

  • RG 98 ASIC’s powers to suspend, cancel and vary AFS licences and make banning orders
  • RG 100 Court enforceable undertakings
  • RG 103 Confidentiality and release of information
  • CP 359 Update to RG 263 Financial Services and Credit Panel

You can also contact ASIC online or call 1300 300 630.

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. Omission of any matter on this information sheet will not relieve a company or its officers from any penalty incurred by failing to comply with the statutory obligations of the Corporations Act.

You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases, your particular circumstances must be taken into account when determining how the law applies to you.

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Last updated: 09/06/2022 10:30