Gaping hole in the AFCA Act

There is a glaring omission in the AFCA Act that allows financial advisers to avoid the new jurisdiction.

Currently, if a person is unhappy about financial advice they have received (including advice about super), they can lodge a complaint against the adviser with FOS. However, that gate will be closed from 1 November 2018, as AFCA cannot accept a complaint against a financial adviser about super-related advice.

The only complaints that can be made to AFCA relating to super are those set out in section 1053 of the Corporations Act, which allows a person to complain about financial advice given on behalf of a trustee.  However, if super-related advice is given independently of a super fund, no complaint can be lodged with AFCA about the financial adviser.

This is clearly an unintended error.  It requires immediate rectification, particularly given the recent focus of the Royal Commission on the conduct of some financial advisers.  The omission might invite financial advisers to ensure any advice they give includes a super component, to ensure that the only recourse their clients have is to the courts, which is commonly prohibitive.

The error cannot be fixed through AFCA’s Rules, as it relates to jurisdiction, which is dealt with in the Corporations Act.  The obvious solution is for the Corporations Act to be amended.  Alternatively, it may be possible for ASIC to make a material change to AFCA under section 1052D of the Corporations Act, but the viability of that option is debateable.

Leave a Reply

Subscribe to Greenfields' newsletter

If you would like to be notified of any significant developments or additions to this site, you can subscribe below.

Loading...