Complacent or compliant - what will you choose?

Mon, 30/03/2015

ASIC’s recent prosecutions of brokers for dishonesty and AAMI for  advertising infringement along with further comments about misleading advertising reminds us that ASIC is fully prepared to prosecute companies and individuals in the insurance sector. Whilst the broker cases related to dishonesty, ASIC’s clear comments remind us that just being complacent is enough to lead to big problems.

The growing number of Authorised Representatives are likely to be one of their next targets according to Gold Seal, the Australian insurance intermediary industry's largest business management, compliance, regulatory and people development organisation.

Gold Seal’s activities include assisting in the monitoring and supervision practices of AFS Licensees who operate groups of Authorised Representatives, both large and small.

Sheila Baker, Gold Seal Managing Director, said “AFS Licensees in the broking sector have had a pretty clear run to date, compared to our cousins in the Financial Advice world. However, the growth of broking AR networks has been so pronounced that it seems a matter of time until the regulator shines its light into these corners closer to home. We want to remind Licensees of the need for their own risk management practices to focus on the professionalism and conduct of ARs.”

Based on its experience in the industry, Gold Seal has determined the five areas businesses find most challenging in the monitoring and supervision of ARs:

  1. Websites – Is the wording used on the website compliant with marketing guidelines? Is the AR aware that those guidelines extend to the use of social media for advertising?
  2. Record Keeping –– heaven forbid if something befalls the AR, does the licensee have access to client information in their absence?
  3. Training and Education - are ARs adequately qualified to meet ASIC requirements? Have they completed bridging qualifications if they have come across from the General Insurance sector? Are they compliant with professional development standards required? Can the AR demonstrate that they have undertaken the learning (i.e. kept their certificates) and can the licensee produce training plans and records?
  4. Can the licensee be absolutely certain they understand “FSR Basics”, e.g. what is personal vs general advice and what is their authority level on the advice they provide to clients? Do they know the difference between retail and wholesale products and clients? Yes - we understand how fundamental those questions are but in our experience, the more vociferously it is protested that they learnt all that years ago, the less likely they are to be able to demonstrate understanding.
  5. Does the licensee have sufficient controls to minimise the risk of non-compliance, or fraud?


Baker summed up by saying, “Mostly, ARs are thoroughly professional insurance experts, but running even a small AR network is in many ways a compliance job. Any complacency could attract ASIC attention. As an industry, let’s keep demonstrating the professionalism of intermediaries and keep the ASIC regulators at bay.”

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