More detail on the Single Disciplinary Body

The Single Disciplinary Body legislation has been passed in the House of Representatives without amendment, despite strong feedback from across the financial advice sector that was provided as part of a Senate Economics Committee inquiry. That feedback included strong representation about the crisis in financial advice and the implications of reduced access to advice and the escalating cost of financial advice.

SAFAA was the first association to appear before the Senate Economics Committee and emphasised the importance of the bill passing in Parliament and FASEA being wound up, with its standard setting powers transferred. However, SAFAA also outlined its concerns about aspects of the Bill, as well as calling for approval of the degrees most suitable to the stockbroking and investment advice sector, as FASEA’s narrow focus on financial planning as the only education pathway was deterring graduates from entering the industry. When the Bill was before Parliament, the Opposition also criticised the government’s work in the financial advice sector as a ‘slow and painful trainwreck’ due to a lack of reviews into professional and education standards.

The Senate Economics Committee released its report at the end of July following its inquiry into the bill (the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Bill 2021). While the report included many of the concerns noted by the financial advice sector, it did not recommend the changes the sector had put forward. Rather, it called for a review in two years.

SAFAA’s feedback, along with that of others, included concerns with the cost of the Single Disciplinary Body, likely to be in addition to the excessive ASIC funding levy; the importance of ensuring that a disciplinary panel is convened for significant misconduct only; and the unnecessary duplication with the training and education requirements for tax (financial) advisers.

Regulations to support the implementation of the Bill, including the operation of the single disciplinary body — the Financial Services and Credit Panel (FSCP) — have not yet been consulted on. The government intends to consult on draft Regulations ‘later this year’. The government has, however, released a policy paper seeking views on two matters that will be covered in Regulations

  • the circumstances when ASIC must convene the FSCP to determine a disciplinary matter
  • the types of administrative sanctions made against a financial adviser that must be included on the Financial Advisers’ Register (FAR).

The policy paper has attempted to address the concerns of the financial advice sector as to how minor matters will be addressed by proposing that the Regulations will provide that ASIC must convene an FSCP if the following three criteria are met:

  1. ASIC reasonably believes that the adviser has contravened a restricted civil penalty provision or a relevant circumstance exists or has occurred, and
  2. ASIC does not propose to exercise and has not exercised its powers such as a banning order, and
  3. the contravention results (or is likely to result) in material loss or damage to clients; material benefit to the adviser; involves dishonesty or fraud; affects the suitability of the adviser to give advice; is a serious or repeated breach; the adviser has not met the education and training requirements; if a provisional adviser has provided a SOA without approval by a supervisor; and financial product advice is provided without being registered.

The policy paper proposes that a FSCP may not be convened for a breach of CPD requirements, the Code of Ethics and various provisional adviser requirements unless the breach meets the criteria set out in item 3 above.

If legislated in its current form, the Bill will not enable the FSCP discretion to determine which sanctions should be included on the FAR and sanctions will remain on the FAR permanently, unless they are subsequently revoked by the FSCP. Sanctions can include directing the adviser to undertake training; undertake counselling; receive supervision; report specified matters to ASIC; or be suspended or prohibited from providing advice. These will apply even to first-time offences.

Only written warnings or reprimands issued by ASIC or the FSCP will not be included on the FAR.

SAFAA will be providing feedback to Treasury on its proposals.

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