ASIC weighs in on independence of financial advisers

ASIC weighs in on independence of financial advisers

The financial services regulator has taken legal advice on whether financial advisers can claim to be ‘independently owned’.

Based on that advice, the Australian Securities & Investments Commission (ASIC) said financial advisers can only use terms such as ‘independently owned’, ‘non-aligned’ and ‘non-institutionally owned’ if they satisfy the conditions laid out in the Corporations Act.

“This means that if a financial adviser does not receive any commissions or volume-based payments or other gifts or benefits, and has no conflicts of interest or influence from any product issuer, then they can describe themselves as being ‘independently owned’,” ASIC said.

“However, if the financial adviser does receive commissions or operates with conflicts of interest, then they will not be permitted to use the term ‘independently owned’ or other like words or expressions.”

ASIC said it had taken the legal advice because while terms such as ‘independent’, ‘impartial’, and ‘unbiased’ were specified as restricted words in the Corporations Act, it was unclear whether words such as ‘independently owned’ were also restricted.

Words matter to consumers

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ASIC deputy chairman Peter Kell said independence is an important issue for consumers as it can sway their choice of investments or adviser.

“Consumers must not be misled into believing that an adviser is independent and free from influence when that is not the case,” he said.

“This is why the Corporations Act puts strong conditions around the use of ‘independent’ and similar word and phrases.”

Advisers given compliance grace period

Given the uncertainty about whether financial advisers could use the terms ‘independently owned’ and ‘non-aligned’, ASIC said it would give them six months to make any necessary changes to their documents and websites.

However, this grace period will not apply to contraventions of the Corporations Act where the specified restricted terms ‘independent’, ‘impartial’ and ‘unbiased’ are used.

ASIC said there had been no uncertainty about how the Corporations Act applied to those terms, so it would continue to take action against anyone who misused them.

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