The Financial Services and Credit Panel (FSCP) has made an order to suspend the registration of financial adviser Ian Reid for three months from 21 November 2024. Mr Reid's financial adviser registration is not in force during the suspension period and he must not provide personal advice to retail clients in relation to relevant financial products.
The FSCP found Mr Reid had not complied with his obligations when providing advice to three clients. Mr Reid used records of advice (ROA) that relied on statements of advice (SOA) that had been given to the clients up to seven years ago.
The FSCP was reasonably satisfied that the further advice exemption from giving an SOA in regulation 7.7.10AE of the Corporations Regulations 2001 did not apply to two of the three clients because there had been changes in those clients' relevant personal circumstances which were significantly different from that in relation to the previous advice.
For all three clients, the FSCP was reasonably satisfied that the s961B and s961G obligations were not complied with. This was because there was not sufficient evidence on the client files:
- that reasonable enquiries were made about the client's relevant circumstances
- that, of the enquiries that were made, the results of those enquiries were taken into consideration and advice scoped appropriately
- that the clients' strategic advice needs were taken into consideration
- demonstrating why the previous recommendations in the SOA remained appropriate, and
- that the relevant provider based all judgements in advising the client on that client's relevant circumstances.
Background
The FSCP
The FSCP makes administrative decisions on matters referred to it by ASIC that relate to the conduct of financial advisers. The FSCP is a pool of industry participants, appointed by the Minister, that ASIC draws upon when forming individual sitting panels. Each sitting panel comprises an ASIC staff member and at least two members of the FSCP.
The FSCP operates separately from, but alongside, ASIC's existing administrative decision-making processes, with the aim of responding to lower-level misconduct and ensuring that minor misconduct does not go unaddressed.
The FSCP has the power to make a registration suspension order under s921L(1)(b) of the Corporations Act. The FSCP's decision has been published on the FSCP Outcomes Register on the ASIC website.
ASIC referred Mr Reid's conduct to the FSCP following an ASIC review that examined why some superannuation members continue to invest in persistently underperforming investment options under their choice superannuation products.
ASIC REP 779
In February 2024, ASIC released Report 779 Superannuation and choice products: What focus is there on performance? (REP 779). ASIC looked at the conduct of superannuation trustees (trustees), financial advisers (advisers) and Australian financial services (AFS) licensees (advice licensees) to examine why some members continue to invest in persistently underperforming investment options under their choice superannuation products.
The requirement for financial advisers to be registered was introduced by the Financial Sector Reform (Hayne Royal Commission Response-Better Advice) Act 2021, in response to Recommendation 2.10 of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Records of advice
In November 2021, ASIC released guidance on ROAs which answers frequently asked questions about ROAs and illustrates three ROA examples to provide clarity to financial advisers and advice licensees on their obligations when using ROAs to provide personal advice to retail clients.
For further information on the FSCP, the financial adviser registration requirement and records of advice see:
- Regulatory Guide 263 Financial Services and Credit Panel for the principles and processes relating to the FSCP
- Information Sheet 276 FAQs: Registration of Relevant Providers
- Information Sheet 277 Registration of relevant providers: Guidance on making declarations
- FAQs: Records of Advice (ROAs)
- 21-294MR ASIC releases guidance and examples on records of advice
