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June 28, 2012

ASIC updates policy on administrative action against financial services providers

ASIC has released a revised version of Regulatory Guide 98 Licensing: Administrative action against financial services providers (RG 98) to assist participants in the financial services industry understand when and how ASIC may take administrative action such as a banning action.

The revised policy reflects amendments to ASIC’s administrative powers under the Corporations Act, introduced as part of the Future of Financial Advice (FoFA) reforms which are due to commence on 1 July 2012. Other revisions ensure consistency between RG 98 and Information Sheet 151 ASIC's approach to enforcement (INFO 151), which sets out how ASIC exercises its enforcement powers.

The main changes to RG 98 relate to ASIC’s power to suspend or cancel an Australian financial services (AFS) licence or to make an order banning a person from providing a financial service on the basis of anticipated future conduct, that is, where ASIC has reason to believe that the licensee is likely to contravene their AFS obligations or that a person is likely to contravene their legal obligations.

Table 1 in RG 98, which sets out key factors ASIC considers in deciding to take administrative action, has been updated to clarify the sorts of factors ASIC may consider in deciding whether to take administrative action, consistent with the factors set out in INFO 151.

Table 2 in RG 98, which sets out factors and examples of conduct relating to specific periods of banning, has been updated to place a stronger emphasis on underlying conduct, in particular conduct involving dishonesty, rather than the amount of loss (if any) resulting from the licensee or person’s actions or the absence of prior contraventions by them.

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Posted 28th June 2012 by David Jacobson in Corporations Act, Financial Services, Future of Financial Advice Reforms