The Australian Securities and Investments Commission (ASIC) has released Regulatory Guide 256 ‘Client review and remediation conducted by advice licensees’. This guide sets out ASIC’s guidance on review and remediation conducted by Australian financial services (AFS) licensees who provide personal advice to retail clients.
All AFS licensees have an obligation to ensure their financial services are provided efficiently, honestly and fairly and this includes taking responsibility for the consequences of their actions if things go wrong and remediating clients who have suffered loss or detriment as a result of misconduct or compliance failure. The review and remediation process is generally a set of activities within the business to review the services provided to clients (where a systemic issues caused by misconduct or compliance failure has been identified) and to remediate those clients who have suffered loss/detriment as a result.
The key principles set out in Regulatory Guide 256 are:
- review and remediation is more likely to be appropriate where a systemic issue has occurred that may have caused loss or detriment to the affected clients;
- the scope of review and remediation depends on the type of misconduct or other compliance failure, the size/structure of the business and the size of the client base. However, the scope should be determined in a way that ensures it covers the right advisors, the right clients and the right timeframe;
- the review and remediation process should be comprehensive, timely, fair and transparent. There should be clearly defined principles to guide the process and an appropriate governance structure;
- effective, timely and targeted communication is key to ensuring clients understand the review and remediation and how it will affect them; and
- clients should have access to an external dispute resolution scheme if they are unsatisfied with the remediation decision made.
ASIC is seeking to ensure that AFS licensees who provide personal advice to retail clients proactively address systemic problems caused by their conduct and also have a process in place to remediate affected clients which is timely, fair and transparent.