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[The Wrap] Who's tougher? FMA or ASIC

Regulators on both sides of the Tasman dealt with similar cases recently but produced vastly different outcomes.

Sunday, August 29th 2021, 1:10PM 2 Comments

by Philip Macalister

Last week Westpac and BT in Australia were found to have given “personal advice” to 14 customers by call centre staff.

The staff advised each person to accept an offer to roll over their external superannuation accounts into their account with the bank.

This has been reported as being a test case to provide clarity to the financial services industry on the distinction between the provision of ‘personal’ and ‘general’ advice.

Sounds very similar to the former New Zealand regime where we had Authorised Financial Advisers (AFA) and Registered Financial Advisers (RFA).

"Westpac was actively conducting a sales campaign aimed at rolling customers from their existing superannuation accounts into Westpac superannuation products. In doing this, Westpac failed to act in the best interests of their customers," ASIC Commissioner Danielle Press said.

"Consumers’ decisions about their superannuation are significant long-term financial decisions affecting their retirement income. Financial institutions seeking to influence those decisions by providing financial product advice, must comply with the law designed to protect consumers."

Back here in New Zealand the Financial Markets Authority said last month some of Foxplan's nominated representatives had provided an investment planning service to some clients since mid-2018.

Under the Financial Advisers Act only AFAs were permitted to provide this service, which involves designing a plan based on an individual’s financial situation and identification of the individual’s investment goals.

Additionally, the FMA found four of FoxPlan’s representatives wrongly informed clients they were an AFA or financial planner, and the FMA had reason to believe FoxPlan’s AFAs failed to comply with disclosure obligations.

What was the outcome of both of these cases? In Australia Westpac was slapped with a $10.5 million fine.

In New Zealand Foxplan received a telling-off from the regulator. The FMA stopped short of taking court action against the firm saying an official public censure and remedial action taken by the firm would be an appropriate penalty.

And just to make it worse for advisers in Australia they had to foot part of ASIC's legal bill.

ASIC conceded that the advice sector had been charged for a proportion of its High Court case against Westpac, saying actions related to unlicensed conduct were “in the interests of licensed participants in [the advice] sector, because it maintains integrity and trust in the licensed sector and deters competition from unlicensed and unregulated competitors”.

Tags: ASIC Financial advice Financial Advisers Act FMA Opinion

« NZX Wealth Technologies profitable and aiming at big targetsJarden hit with $40k penalty »

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Comments from our readers

On 30 August 2021 at 11:35 am Dirty Harry said:
The NZ outcome was probably proportionate and appropriate, though not many readers here would have had a problem with a pecuniary penalty either.

As has become typical for them, the ASIC response goes so far off the charts they went across the back of the page and back around to go across the chart again.

And making the local advisers pay for it? So, now is ASIC's role to protect the interests of "licensed market participants" and prevent "competition from unlicensed and unregulated competitors".
Wow. Is that in line with their vision? https://asic.gov.au/about-asic/what-we-do/our-role/asic-vision/

It all sounds a little bit like the cosy relationship that was exposed by the Royal Commission. At least Westpac wasn't sent a draft of the press release this time.

Here I was thinking there might be a typical consumer who stands to benefit far more from effective regulation, and the prevention/deterrence of unlicensed market participants might somehow serve to protect them.

But alas, I guess I just don't understand how all this stuff works and who it really serves.
On 30 August 2021 at 1:53 pm w k said:
@dirty harry, i can assure you that there are not many people who are not in the same boat as you. yeah, our boat is filled to the bream.

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Last updated: 28 September 2021 9:12am

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