AFCA review targets problem of wholesale client complaints

Stockbrokers and Financial Advisers Association (SAFAA) welcomed Treasury’s recommendation in its report on the Independent Review into the Australian Financial Complaints Authority (AFCA) that complaints from sophisticated clients should be excluded.

SAFAA has long expressed concerns about the extent to which AFCA accepts complaints from sophisticated and high-net-worth investors. Our view is that the exercise of jurisdiction to hear complaints from wholesale clients is not the basis upon which the external dispute resolution scheme was legislated by Parliament and is an issue of fundamental unfairness to retail clients, for whom AFCA was set up to assist, as well as member firms.

‘We are pleased to see that consideration has been given to the problem of wholesale investors, with significant investment sophistication and the resources to seek redress, taking advantage of AFCA, which was set up to provide a free complaints service for retail investors who cannot pursue redress through the courts,’ said Judith Fox, SAFAA CEO.

SAFAA members are a small but important group of AFCA members. They represent the full range of services from online providers providing execution-only services to full-service stockbroking and investment advice. SAFAA agrees with the report’s findings that AFCA should look to more actively exercise its existing discretion to exclude wholesale complaints in appropriate circumstances and that AFCA should exclude complaints from sophisticated clients as a matter of course, unless there is evidence that they have been incorrectly or inappropriately classified.

‘It is not fair on AFCA, its members or retail clients for time and resources to be spent on complainants who have the resources and sophistication to bring their claims before a court,’ Ms Fox stated.

‘SAFAA looks forward to engaging with AFCA on issues such as the exercise of its discretion to hear complaints from wholesale clients in order to ensure that AFCA delivers outcomes that are fair to both consumers and AFCA members.’

Judith Fox
0408 667 246

Note to editor: The stockbroking and investment advice sector has an exemplary record as regards the handling of customer complaints. The rate of investor complaints in the listed securities sector is very low and, to the extent that complaints do arise, they are being effectively dealt with through the licensees’ internal dispute resolution process. As reported in AFCA Complaint statistics, out of a total of 80,833 complaints received during the period 1 October 2019 to 30 September 2020 just before submissions were due on the Review, only 4,595 complaints related to investments and advice. Of this number, only 488 complaints (or 0.6%) were made against stockbrokers. To place this complaints figure into context, during the 2020 calendar year, there were 439, 360, 450 equity trades on the ASX.

The Stockbrokers and Financial Advisers Association (SAFAA) is the professional body for the stockbroking and financial advice industry. Our members are Market Participants and Advisory firms that provide securities and investment advice, execution services and equity capital-raising for Australian investors, both retail and wholesale, and for businesses. Practitioner Members are suitably qualified professionals who are employed in the securities and derivatives industry.