ASIC today released a consultation paper proposing guidance on review and remediation programs conducted by Australian financial services (AFS) licensees that provide personal advice. The consultation paper also proposes clarifications to the record-keeping requirements for AFS licensees relating to the best interests duty.
A key part of an AFS licensee's obligations is remediating clients for losses suffered following non-compliant advice, fraud or other breaches of the law. At times, establishing a review and remediation program may be the most appropriate approach to address client loss.
The draft guidance sets out how an effective review and remediation program should be designed and operated and how such a program operates alongside other key consumer compensation obligations, namely the internal and external dispute resolution obligations.
In developing the draft guidance, ASIC has been informed by its recent experiences in negotiating a number of review and remediation programs conducted by advice licensees.
ASIC has also recently identified that, in some cases, client remediation would be facilitated by clearer record-keeping obligations for AFS licensees that provide personal advice and is seeking to address this issue through proposals set out in the consultation paper.
'ASIC wants to ensure that all review and remediation programs conducted by advice licensees operate in a way that is fair, honest and efficient and that all potentially affected consumers have access to remediation. Consumers should have trust and confidence that a program will produce fair and consistent outcomes', ASIC Deputy Chairman Peter Kell said.
The consultation paper provides draft guidance on:
- when to establish a review and remediation program
- determining the scope of the program
- designing a comprehensive and effective program
- communicating effectively with clients, and
- ensuring access to the external review of decisions.
The proposed changes to the record-keeping obligations relating to the best interests duty seek to place beyond doubt that AFS licensees must have access to records for the period of time in which the records are required to be kept, even if a person other than the licensee holds the records. These changes are to be reflected by way of an amendment to Class Order [CO 14/923] Record-keeping obligations for Australian financial services licensees when giving personal advice.
Background
ASIC announced on 6 May 2015 that it would develop regulatory guidance on advice licensees conducting review and remediation programs.