Before you go, let's talk about compliance


With 2018 rapidly approaching, now is a good time to reflect on ASIC's 2017 surveillance activity and consider whether, and to what extent, your arrangements would meet, or exceed, their expectations.

As a reminder, ASIC published the following performance assessment for January to June 2017. 

ASIC Report 536: "ASIC enforcement outcomes: January to June 2017"

ASIC Report 536: "ASIC enforcement outcomes: January to June 2017"


ASIC have always focused their attention on 'gatekeepers' but, in the back half of 2017, there appears to be an increased focus on Licensees and their capacity to monitor and supervise their representatives. To some extent, this is entirely predictable, given that Licensees are required to both comply with the financial services laws and "take reasonable steps to ensure that its representatives comply with the financial services laws". 

Logically, and reasonably enough, representatives' failures or misconduct will often suggest that the Licensee has failed to take reasonable steps to ensure compliance. The National Sterling action may have attracted extensive coverage because of its focus on the best interests duty, but that should not distract your attention from ASIC's increasingly critical scrutiny of their compliance arrangements. 

This finding, the first of its kind, provides guidance to the industry about what is required of licensees to ensure representatives comply with their obligations to act in the best interests of clients and provide advice that is appropriate
— ASIC Deputy Chairman Peter Kell

In our opinion, it would be imprudent for a Licensee to think that, in the absence of widespread failures or systemic issues, they will escape ASIC's attention and censure.

2017 also saw repeated instances of actions against licensees on the basis of seemingly isolated failures. In August, a Licensee celebrated the negotiation of an Enforceable Undertaking after "one of its representatives was found providing poor advice". ASIC, however, stated that the regulatory intervention occurred because the Licensee "was giving poor financial advice, and lacked adequate monitoring and supervision of its representatives".

As a result, ASIC is concerned that [the Licensee] may have failed to take reasonable steps to ensure that its representatives complied with financial services laws, and that it did not have available adequate resources to provide financial services and to carry out supervisory arrangements.
— ASIC Media Release dated 15 December 2017, 17-439MR

Attentive observers will also note an increasing regulatory focus on advisers using "a 'one size fits all' advice model". ASIC are doubling down on those issues and acting on the failure of Licensees to detect, discourage or prevent these approaches.



This language, and these examples, should prompt compliance managers everywhere to assess the depth and rigour of their monitoring and supervision.


Some should perhaps make this their critical New Year's Resolution. 

All these facts mean that now is the perfect time to review your monitoring and supervision regime to ensure that it more effectively protects clients' interests, manages your risks and satisfies ASIC's legitimate expectations. In our view, you should consider whether your measures, processes and procedures effectively and demonstrably that you have:

  • prioritised clients’ interests and consumer expectations;

  • established a transparent, objective, consistent methodology for determining “advice quality”;

  • incorporated a risk based methodology with early warning analytics;

  • embedded a focus on advice quality, advice process and the management and avoidance of conflicts of interests;

  • provided for the effective identification, classification and management of risk;

  • promoted professionalism and continuous improvement;

  • helped your Representatives and Authorised Representatives to understand their obligations and the Licensee’s expectations;

  • provided consistent consequence management measures;

  • focused on training, remediation and effective behavioural change.

  • created a culture to encourages the remediation, escalation and reporting of breaches or anticipated breaches of the AFS Licence and the financial services laws; and

  • ensured that incidents and contraventions are managed appropriately and efficiently.

It may appear to be an ambitious list, and require more resources and critical reflection than is comfortable for many Licensees. In fairness, these expectations are achievable and reasonable for business that relies on trust, credibility and a social license to operate.

As a gatekeeper and steward, a Licensee should be 100% committed to safeguarding their clients' interests and providing advice and services that exceed consumer expectations.

In our view, this should not be done out of fear of regulatory sanction but embraced as a legitimate and organic element of the Licensee's commitment to the advice profession.