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ASIC issues guidance on adviser warnings and reprimands

Regulation

An information sheet explains the circumstances in which it will give advisers warnings and reprimands.

By Miranda Brownlee4 minute read

ASIC has published an information sheet that explains when it will give a warning or reprimand, how that will be communicated and when it will provide procedural fairness.

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Information Sheet 270 Warnings and Reprimands details how ASIC will fulfil a requirement, necessary since 1 January this year, that it gives financial advisers a written warning or reprimand following the introduction of the Better Advice Act.

ASIC said warnings and reprimands would be sent by letter to advisers and contain a statement of reasons for its decision.

“ASIC can give either a warning or a reprimand to address a specified circumstance, not both,” the information sheet said.

“Generally, a warning will warn a financial adviser against continuing the conduct or circumstances that led to us giving the warning, whereas a reprimand will admonish the financial adviser in relation to the conduct or circumstances that have already ceased.”

Where a concern is brought to ASIC’s attention, it would conduct its usual triage, investigatory work and referral process.

ASIC said: “If, at the end of this process, ASIC (or our delegate) has formed a reasonable belief that a warning or reprimand circumstance exists in relation to a financial adviser, we must:

  • Exercise one of our other powers under the corporations legislation (e.g. to impose a banning order or accept an enforceable undertaking)
  • Convene a sitting panel of the Financial Services and Credit Panel (FSCP), or
  • Give the financial adviser a warning or reprimand

From 1 January 2022, ASIC must convene a sitting panel of the FSCP in the circumstances prescribed in regulation 12N of the Australian Securities and Investments Commission Regulations 2001 (ASIC Regulations).

“In other circumstances relating to less serious misconduct (warning or reprimand circumstances), ASIC is not required to convene a sitting panel but we must give a warning or reprimand if we do not propose to exercise our other enforcement powers or convene a sitting panel of the FSCP: see section 921S of the Corporations Act.”

Circumstances where ASIC will issue a warning or reprimand

One of the circumstances in which ASIC will issue a warning or reprimand is where an adviser has contravened, or been involved in the contravention of, a financial services law and ASIC does not reasonably believe the contravention is serious, the info sheet explained.

ASIC will also issue warnings and reprimands where an adviser has refused or failed to give effect to a determination made by the Australian Financial Complaints Authority (AFCA). This is in circumstances where the refusal or failure to implement a determination has not resulted in material loss or damage to a client and does not involve dishonesty and fraud.

It will also issue a warning or reprimand where a financial adviser has been an officer of two or more corporations unable to pay their debts.

The other circumstance where ASIC will issue a warning or reprimand is where an adviser has not complied with an order by the Tax Practitioners Board.

A copy of the warning or reprimand letter will also be provided to the AFS licensee of the adviser.

Procedural fairness

The information sheet said that before ASIC gives a warning or reprimand, and gives a copy to the financial adviser’s AFS licensee, it would consider providing procedural fairness to any person that will be directly and materially adversely affected if the warning or reprimand was issued.

ASIC acknowledged that providing a copy of the reprimand or warning to the AFS licensee could in certain circumstances, have a direct, adverse effect on the adviser’s interests, including their reputation and livelihood.

“We will, however, decide whether a financial adviser is entitled to procedural fairness on a case-by-case basis,” said ASIC.

When providing procedural fairness, we will generally offer the financial adviser the chance to make a written submission about the proposed giving of the warning or reprimand. We will consider the submission before deciding whether to give a warning or reprimand.”

Decisions by ASIC to give warnings or reprimands are reviewable by the Administrative Appeals Tribunal.

ASIC issues guidance on adviser warnings and reprimands
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