Financial Services and Credit Panel granted statutory powers

The move comes following the Financial Sector Reform Amendment (Hayne Royal Commission Response—Better Advice) Regulations 2021 being made this month. 

While the panel ceased to operate in July of this year in anticipation of the reforms, the initial peer review panel included several credit industry members, such as Don Crellin, the managing director of brokerage Resolve Finance. As a result, there are currently no members of the FSCP.

The panel was initially formed to hold administrative hearings and decide whether to make banning orders against individuals for misconduct in providing financial services to retail clients or engaging in credit activities.

Each panel of the new FSCP will be comprised of an ASIC staff member, who will chair the panel, and no less than two industry participants. The pool of industry participants will be appointed by the minister responsible for administering the Corporations Act.

Moreover, as of next year, the panel will have new powers, which largely relate to financial advisers but also cover some credit activities. 

These will enable it to address a broader range of circumstances, including less serious misconduct by financial advisers.

For example, the FSCP will have the power to direct financial advisers to undertake specified training, counselling or supervision and to report certain matters to ASIC.

The FSCP may also suspend or cancel a financial adviser’s registration; issue infringement notices in specified circumstances; recommend that ASIC commence civil penalty proceedings; and enter into enforceable undertakings with financial advisers.

These new powers intend to put into force a recommendation made by Commissioner Kenneth Hayne in the banking royal commission (Recommendation 2.10: New financial adviser disciplinary system).

When an FSCP is convened

Under the new rules, from 1 January 2022, ASIC must convene an FSCP when certain circumstances arise (as prescribed by the regulations) and when ASIC has not exercised, and does not propose to exercise, any of its powers under the corporations legislation against the relevant provider in relation to the circumstance.

This may include where the relevant provider has, at least twice, been linked to a refusal or failure to give effect to a determination made by AFCA relating to a complaint that relates to credit activities (as per the meaning of the National Consumer Credit Protection Act 2009) and ASIC reasonably believes that the refusal or failure either involves dishonesty or fraud, or has resulted, or is likely to result, in material loss or damage to a client of the relevant provider; or has resulted, or is likely to result, in a material benefit to the relevant provider.

For wealth advisers, it may trigger where it reasonably believes that a financial adviser is not a fit and proper person to provide advice or a financial adviser becomes an insolvent under administration and ASIC is aware of this. In addition, ASIC must issue a warning/reprimand in relation to certain misconduct.

ASIC has said it will proceed to issue a warning/reprimand or make a referral to an FSCP only where it has "formed the reasonable belief after carrying out its usual triaging, investigatory work and referral processes".

As such, not all concerns that come to ASIC’s attention will result in ASIC issuing a warning/reprimand or a referral to an FSCP.  

ASIC has said it will consult on guidance regarding the operation of the FSCP in "early 2022", when it will also release guidance about how ASIC will exercise its new power to issue warnings/reprimands in early 2022.

[Related: ASIC demands review into ANZ home loan referrals]