Risk Regulatory Update

Final draft of Quality of Advice terms of service released for feedback

The final draft of the Terms of Reference for the Quality of Advice Review has been released by the government, and Michelle Levy has been announced as the reviewer. Levy is a financial services regulation and superannuation lawyer. The review will assess how the regulatory framework can deliver better outcomes for consumers, investigating improving th clarity and availability of documents given to consumers, and examine any unintended consequences of the regulatory framework.

The review will invite submissions from the public and consult with stakeholders, with the report due in December 2022.

National Advice Solutions charged in relation to unsolicited sales calls

Financial advisory firm National Advice Solutions has been charged in a Queensland court with 11 offences of offering to issue or sell a financial product via unsolicited phone calls. The firm made cold calls to 11 consumers and encouraged them to move their superannuation into different products. The maximum penalty is $133,200 per breach (at the time). A hearing is set for May.

Finfluencers on notice

The Australian Securities and Investments Commission (ASIC) has warned finfluencers and licensees that hire them that if they see harm occurring, action will be taken. Social media influencers have been provided with guidelines where contraventions of law may occur inadvertently, what their legal requirements are, and considerations to take. There is also guidance for licensees that use influencers to increase their brand awareness or sell products.

An ASIC survey found that 33 per cent of 18-21-year-olds follow at least one financial influencer on social media, with 64 per cent saying their financial behaviour has changed due to an influencer.

Separating financial advice from product advice

An interim report has been released on a review of the Legislative Framework for Corporations and Financial Services Regulation by the Australian Law Reform Commission (ALRC) recommending definitions of ‘financial advice’ and ‘product advice’ be simplified. There is a call to replace the terms ‘general advice’, ‘intrafund advice’ and ‘robo advice’ with other terms to ensure consumers understand thy are receiving information, not personal advice.

The Advisers Association (TAA) does not support the ALRC recommendation to substitute ‘financial product advice’ with ‘general advice’ or ‘personal advice’ until after the Quality of Advice Review has been conducted.

New AFCA funding model proposal

A proposal has been put forward by the Australian Financial Complaints Authority (AFCA) for a new user-pays funding model to reduce costs for members when dealing with external complaints. The new model suggests a single registration fee to be introduced with a simplified complaints fee structure. All members will receive five free complaints each year. This reduces the burden on smaller members such as brokers and financial advisory firms.