Who’s in charge of the SDB?

Alex Burke,  Senior Writer,  No More Practice Education

Late last year, LNP MP Bert Van Manen put a question to ASIC representatives during a Parliamentary committee hearing: what was the regulator doing to ensure a "smooth transition" to the new professional standards system and single disciplinary body for advisers? 

This was likely something many advisers were wondering themselves in the drawn-out period following the late-2020 announcement that FASEA would be wound up. Even after the passage of the Better Advice Bill, it was still quite unclear just how and when ASIC would assume FASEA's duties and rejig its Financial Services and Credit Panel (FSCP) to become the sole disciplinary body for the advice profession - the missing link for policing instances of adviser misconduct that don't warrant a banning order. 

Regarding the former, we were given a bit more information in December: dates for the February round of exams (the 17th, 18th, 19th and 21st) and confirmation that there will be two more rounds after that before September 30th. And as far as Treasury's post-FASEA standards-setting responsibilities are concerned, we know about the proposal for an "experience pathway" which would no longer require advisers with 10 or more years' experience to undertake a bachelor's degree in order to continue providing advice. 

As for the single disciplinary body, we didn't know much at all - even though it's technically been in operation since January 1st - until last week when Senator Jane Hume announced 31 part-time FSCP appointees, including former AFA CEO Brad Fox, former FPA chair Julie Berry and Hamilton Wealth Partners managing partner Will Hamilton. (There is some speculation about other names on the list thanks to the brevity of Hume's statement, which also refers to "further information" on ASIC's website but just links to the ASIC home page.) 

ASIC will responsible from drawing from this pool of appointees whenever it convenes an FSCP, which must be chaired by an ASIC staff member. And as we've previously discussed, once the matter is before the FSCP, the panel will consider evidence and decide whether or not a sanction is appropriate. If they determine that it is, they will then give notice to the relevant adviser and inform them of their rights, which include requesting a hearing and making a submission. Depending on the outcome, the FSCP can impose the original sanction, add new sanctions or make a recommendation that ASIC pursue civil penalties. 

Does that clear everything up? No? Well, you're not alone in your confusion. 

In fact, referring back to Van Manen's question at the start of this piece, ASIC commissioner Danielle Press responded that the regulator didn't "have any idea about" when an FSCP would need to be convened. According to the Better Advice Act regulations, an FSCP must be convened when ASIC "has not exercised and does not propose to exercise" any of its existing powers (banning orders, warnings, reprimands) in response to circumstances where a relevant provider: 

  • becomes insolvent
  • is convicted of fraud
  • is determined by ASIC to not be a "fit and proper person to provide personal advice to retail clients" 
  • doesn't meet education and training standards
  • provides personal advice while unregistered
  • "seriously" contravenes financial services law, where "seriousness" is determined by the material damage to a client, material benefit to the provider and/or the level of dishonesty or fraud involved
  • has at least twice been linked to a refusal or failure to give effect to an AFCA determination that relates to a financial services business or credit activities and that refusal has resulted, or is likely to result in material client harm 

While some of the items on this list are fairly clear-cut, others are very much open to interpretation. This is a problem because, as the AFA noted in August last year, "the laws applying to financial advice are very complex, extensive and easily breached," which means any routine adviser audit could potentially trigger the process leading to an FSCP being convened. 

"Where even the most minor of matters are reported to ASIC or the SDB and involves unavoidable additional cost," the AFA added, "this only discourages the application of rigorous processes." 

That we don't yet have a solid understanding of how the SDB will operate and when FSCPs will be convened also means we don't know how much the new system will cost once it finally gets up and running. And since no one at ASIC has completely ruled out the SDB impacting future adviser levies, those costs could have a material impact on the advice sector.

A list of names just isn't enough.


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