Financial planners on notice after Senate report on ASIC

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8 July 2014

The Senate Committee report into ASIC’s performance has once again put financial advisers and their AFSL holders under the spotlight. Among the recommendations are a call for higher levels of surveillance by ASIC as well as more protection (and possibly incentives) for whistleblowers. On top of this, the possibility of class actions being brought against financial planners and licence holders has been well and truly boosted. Plaintiff law firms Slater & Gordon and Shine Lawyers are already calling for customers affected to contact them.

The Senate Economic References Committee released its report into the Performance of ASIC on 26 June. The Committee used two case studies to examine ASIC’s conduct. One of these was the now infamous case concerning financial planners operating as part of Commonwealth Financial Planning Limited (CFPL).

Whilst the report focussed on more extreme case studies, the Committee’s findings have ramifications for the entire industry.

Internal compliance – get your house in order

The report calls for ASIC to intensify its surveillance of financial advice businesses and to also publish surveillance findings. As a consequence, we expect ASIC to have a renewed focus on ensuring AFSL holders have adequate internal compliance procedures to identify and deal with instances of misconduct.

All AFSL holders should ensure they are in a position to respond to any investigations that ASIC may commence, however if your business has been recently identified as a source of concern by ASIC, be prepared to be among the first to be targeted.

Our article, Will your internal compliance pass the ASIC test? Steps to take before the regulator comes knocking provides some key steps that AFSL holders should take to minimise the risk of being the subject of ASIC’s increased surveillance.

Protecting and incentivising whistleblowers

The Committee’s conclusion that ASIC failed to respond appropriately to information provided by the whistleblowers in the CFPL case has prompted it to call for expanding whistleblower protection and internal company processes which encourage disclosure.

More controversial is the recommendation that the government explore reward based incentives or US style bounties for whistleblowing.

The report does acknowledge that ASIC has already improved its response to whistleblower disclosure and financial institutions will need to be prepared for a more proactive ASIC in this regard. Click here to see our article on how financial institutions can prepare for increased whistleblower activity.

Get ready for more litigation

Ultimately, the report and the media hype surrounding it, has created an environment ripe for opportunistic litigation by plaintiff firms and litigation funders. Class actions have already been foreshadowed and plaintiff law firms Slater & Gordon and Shine have been reported as saying “the phones are running hot”.

The report also drew attention to the lending practices of financial institutions in the period 2002 to 2010, noting that the Committee received well over 160 submissions from people expressing concerns about the conduct of brokers and lending institutions. The report flags the potential for claims to arise in the near future alleging breaches of National Consumer Credit Protection Act 2009.

Given this environment, AFSL holders should be acting now to determine what practical steps should be taken to both identify and minimise the risk of litigation and regulator criticism and/or enforcement action.

This may include setting up internal review programs to identify and address high risk issues and reviewing and revising whistleblower policies and procedures. Employees should be encouraged to raise issues internally and then steps taken to respond to whistleblower claims within the confines of current legislative requirements. Importantly, any such steps should be taken in a manner that preserves legal privilege to the extent possible in communications that are confidential and made for the purpose of giving or receiving legal advice. 


Further information on practical steps you can take to minimise the risk of litigation and regulator criticism in the current environment can be accessed here.




The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.


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Anna Ross

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