Better Advice Act: In force but what happens now?

By Thaw Thaw Htin

4 March 2022

As the clock struck midnight on 31 December 2021 few of us turned our mind to the fact that the Better Advice Act (the Act) had just come into force.

The Act is part of the implementation of Recommendation 2.10 of the Hayne Financial Services Royal Commission Report.

This week ASIC released a consultation paper seeking feedback on ASIC proposed updates to Regulatory Guide 263 Financial Services and Credit Panel. ASIC is seeking comments from the public and interested parties on the changes to the Financial Services and Credit Panel (the Panel) including comments on the likely compliance costs, likely effect of competition and other impacts, costs and benefits.

Specifically, ASIC is seeking feedback on its approach to:

1. determining when to convene a sitting panel of the Panel;
2. holding hearings of sitting panels using technology; and
3. publicising decisions of sitting panels.

Comments are required by 5.00pm (AEST) on Monday, 28 March 2022.

ASIC’s final Regulatory Guide on the Panel is expected to be released in May 2022.

What do we know?

From 1 January 2022 the Act has empowered ASIC to convene a Panel to take a range of disciplinary action against financial advisers in respect of circumstances which occur after that date.

Although the Panel acts separately from ASIC’s own decision making process it will act alongside ASIC.

When will a Panel be convened?

The Better Advice Act Regulations provide detail on the circumstances in which ASIC must convene a Panel.¹ The circumstances where ASIC must convene a Panel include (where ASIC is not taking other action):²

• if ASIC is aware that the relevant provider has become insolvent or is convicted of fraud;
• if ASIC reasonably believes that the relevant provider:

o is not a fit and proper person to provide personal advice to retail clients in relation to relevant financial products;

o has contravened the education and training standards or their requirements to provide a statement of advice; or

o is providing advice while unregistered,

• if ASIC reasonably believes that a financial services law has been contravened and that contravention is serious;
• where the relevant provider has at least twice ‘been linked to’ a refusal or failure to give effect to a determination made by AFCA and the consequences of the failure are serious.

The Regulations provide that serious contravention is where there has been or is likely to be a material loss or damage to the client or a material benefit to the provider, or if there is an involvement of some deception or fraud.³

The Consultation Paper provides information on ASIC’s proposed approach in circumstances where under section 1391 of the ASIC Act it may convene a sitting panel. ASIC states that it will only do so where convening a panel will result in some regulatory benefit having regard to the interest of investors and consumers in the financial system. ASIC considers that targeting misconduct as widespread or part of a growing trend will send an effective deterrent message which is likely to result in a regulatory benefit.

Who is on the Panel?

On 10 February 2022 the Minister for Superannuation, Financial Services and the Digital Economy published a list of 31 people eligible to sit on panels. The eligible Panel members have been appointed to the Panel until 31 December 2024.

The eligible Panel members come from backgrounds including accounting, financial and risk compliance , stockbroking and industry executives, and many of whom have previously served on government panels.

What happens in the interim?

The fact remains that, although ASIC is currently in consultation, ASIC’s final decision on its approach to the operation of the Act and particularly the conduct of the Panel will not be finalised for at least another two months.

On a practical level the Act provides that the legislative instruments made by FASEA (including the Code of Ethics but not including examination matters) will continue until the relevant Minister amends or makes new standards.⁴

The financial services industry is once again in the unenviable position of being subject to new rules and procedures put in place by the Act which have not yet fully been disclosed to them. However, we expect that ASIC will, as it has previously stated, take a lenient view of those who inadvertently breach the new rules and regulations.⁵

We will provide further updates on this topic as more information comes available.

For more information, please contact the authors:
Thaw Thaw Htin | Principal

1. Section 12N Australian Securities and Investments Commission Regulations 2001.
2. Section 12N and 139(2) Australian Securities and Investments Commission Act 2001 (Cth)
3. Section 12N(4) Australian Securities and Investments Commission Act 2001 (Cth)
4. Section 921E of the Act.
5. See our earlier article on the Better Advice Act 2021 here.

Disclaimer: The information published in this article is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.