Author: Sheila Baker, Managing Director, Gold Seal

The matter of adequate filing practices has come to the fore lately, as we continue to examine broker practices, and how the simplest things can trip you up.

I can hear you asking “Seriously? Now they’re telling us how to file?” We’re not telling you how to file; we’re urging you to file in the first place.

The reason we are addressing this topic is because we find ‘less-than-optimum’ practices with alarming frequency when completing compliance audits of insurance brokerages. There are many reasons why you need to have good filing (and note-taking) practices in place:

  • It’s crucial to remember that insurance brokers are regularly required to produce evidence on how and when they carried out a broking transaction. This ranges from sending out FSGs, all the way through to showing that they have cancelled a policy in a legally compliant manner. The ability to produce good quality evidence, will demonstrate that your records are an accurate representation of your clients’ requests, analysis of their needs and the transaction. This is critical in situations where a client’s recollection of a situation varies from the broker’s. It will also help prove that you follow quality practices.

Think of it this way: if the Regulator lands on your doorstep unexpectedly (it happens!) and none of your filing is in your broking system – if you then can’t produce required evidence for any reason – (including “I didn’t file it”) – this is not going to be an acceptable answer to them). Your brokerage’s internal or external auditors also won’t accept it.

  • If one of your clients makes a complaint that is either dealt with via your Internal Dispute Resolution (IDR) process, and/or the client lodges it with AFCA, it will be very difficult to defend it if you can’t produce good quality, contemporaneous documentation. It is quite likely that you/your brokerage will incur a PI claim which is an unfortunate situation for all parties involved, especially your client (and your PI insurer).
  • Authorised Representatives (ARs) and AFS Licensees should be aware ASIC has amended the ASIC Act 2001 [Class Order 14/923] to place a direct obligation on ARs to keep client records in relation to the personal advice they provide to clients, and to provide those records to the AFS Licensee that they are work under if records are requested.

The aim of this Class Order was to address AFS Licensees’ concerns that they would encounter difficulties with ARs that have moved to a different AFS Licensee and didn’t (or couldn’t) cooperate with a request to access documents, even where contractual arrangements existed.

The Class Order:

  • Confirms that AFS Licensees must have access to records for the period of time for which the records are required to be kept, even if a person other than the Licensee holds the records; and
  • Makes explicit that ARs, who are advisors, must keep records, and give them to their authorising Licensee if the records are requested to comply with financial services laws.
  • Under section 912(G)(4) of the Corporations Act, ARs have a statutory obligation to not only keep records for a period of 7 years – but to also provide access to those records to the authorising AFS Licensee, regardless of whether the AR is an AR of the Licensee at the time of request or not.
  • The obligations continue after the AR ceases to be authorised by a licensee.

It’s always the document that you want that you won’t be able to find when you need to – unless you have exercised some discipline around this process. It’s important to remember the phrase – if it’s not in writing it didn’t happen.

So what are the types of documents that you need to be able to find? In a retail transaction, the critical documents to be able to put your hands on quickly are:

  • A copy of the Financial Services Guide that was given to the client – it must be up-to-date and have been provided ether at, or before the time you next gave the client advice since it was last updated. (Essentially your retail clients must always have a copy of your current FSG when you assist them).
  • If you have provided General Advice, a copy of your brokerage’s General Advice Warning (GAW) that was given in writing. If a verbal GAW was given, you need to keep a file note/other evidence of when this was done and a copy of the GAW script that was used.
  • If you have provided Personal Advice, a copy of the Statement of Advice (SoA) that was provided to the client.
  • Copies of all relevant Product Disclosure Statements.
  • Confirmation to the client of the cover placed.
  • Copies of client and insurer or underwriting agency correspondence.
  • A Cover note if issued by the insurer.
  • Completed proposal form (preferably signed and dated by the client).
  • A copy of the invoice.

Of course there may be several places where these documents and related correspondence will be found. They should be in your broking system, your document management system, your Customer Relationship Management system, or even in hard copy files (if you still utilise hard copies in conjunction with a document management system). It doesn’t matter where, just as long as they can be found and produced on request.

Writing and maintaining client files in this manner will assist you, your brokerage and your clients by:

  • Saving time when you need to locate information (either in relation to a claim, or in your day-to-day work.
  • Assist in the professional image of individual brokers and brokerages.
  • Help prevent PI incidents.
  • Assist in preventing potential loss of reputation for individual brokers and AFS Licensees.
  • Fulfils AFS License compliance obligations.
  • And…. it’s simply good business practice.

For assistance or guidance on any Compliance matter call  our Compliance Helpline on 03 9510 5100 or email