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ASIC has issued a warning to financial services licensees, asking them to ensure they have ‘robust’ recruitment processes in place when appointing representatives who have worked for a business ASIC has taken action against – but this can be an issue for mortgage brokers, according to Gadens partner, Jon Denovan.
In the original release, ASIC Deputy Chairman, Peter Kell, says the warning follows recent ASIC action against licensees, including financial advisers and securities dealers, with ASIC becoming aware many of their representatives have moved to new licensees.
“More broadly, we are seeing significant industry restructuring at present and it is vital that recruitment standards are high in such an environment,” says Kell.
But Denovan says this can be difficult in the mortgage broking industry, particularly when brokers are switching aggregators.
#pb#“If you are hiring somebody, you generally need to make sure that they’ve had two years’ trouble-free experience,” he says. “That’s one of the problems that arises when brokers want to swap aggregators, because sometimes the aggregator doesn’t want to give you a letter saying that you’re a good boy.”
This isn’t necessarily because aggregators are trying to make it difficult for brokers to switch, but because they can be held legally liable if the broker is found to have engaged in inappropriate behaviour during their time spent with the previous employer.
“If you write that they’re a good boy and they didn’t turn out to be, somebody might sue you…It’s a bit of a problem in the mortgage industry, because particularly if you're appointing someone as a credit representative, you want to make sure that they’re not going to damage your licence via their conduct.”
Often, the best way to navigate this road block is to all you could do is to, as an employer, ring someone up at the broker’s previous aggregator and ask for an off-the-record, no-liability statement.
And it’s crucial that aggregators do check, says Kell, because in many cases representatives of licensees which have come under ASIC fire will be adequately trained, competent and comply with the financial services law.
#pb#“However, where representatives have come from an environment in which there was a culture of poor compliance or poor quality advice, appointing licensees need to take extra care to satisfy themselves that representatives are properly trained and monitored to address early any issues that might arise.”
“ASIC urges all licensees to review their current approach to appointing representatives and make sure processes are robust. Licensees must have in place adequate compliance and governance standards. This includes being responsible for the conduct of representatives they appoint.”
Kell says licensees must:
“Monitoring and supervision are much more than audits and compliance checks. They are about proactively ensuring that advice is appropriate and clients are treated fairly,’ he adds. “ASIC is continuing to closely scrutinise licensees’ obligations to demonstrate adequate monitoring and supervision and will not hesitate to take action where we find those practices deficient.”
