Review and remediation programs have become popular instruments for banks and other financial advice providers (collectively called advice licensees) in recent years, for all the wrong
reasons. These programs are set up in the wake of systemic issues being identified in relation to financial advice services, and take the form of a widespread,
in-house review of advice. The aim is to identify and compensate those clients who may have been ripped off or offered dodgy advice.
Review and remediation: everybody's doing it
"We are seeing a growing trend in these programs being conducted proactively to address issues that advice licensees have identified within their
business," said Joanna Bird, Senior Executive Leader of ASIC's Financial Advisers team. "In light of our regulatory experience and this growing trend we
thought it was important to develop guidance to ensure that all review and remediation programs (whether large or small) are conducted in a way that is
efficient, honest and fair."
There are currently three major review and remediation programs underway by big banks. CBA and Macquarie Group are well underway, while NAB recently began
inviting customers to submit their advice for review. The programs were set up after a series of scandals that plagued the financial advice sector, in
which it was exposed that rogue advisors from these institutions were failing to act in the best interests of their clients.
Last week Westpac agreed to begin a review and remediation process after ASIC raised questions about the bank's open-handed approach to credit limit
increases. The regulator found that Westpac was failing to make reasonable inquiries about whether or not credit card holders were actually employed before
approving applications to increase their credit limit. The bank will begin reviewing cases where customers had experienced financial difficulty, and will offer
refunds where appropriate.
Consistency across the industry
The guidelines seek to properly define "review and remediation program" and "systemic issues", and set non-compulsory procedures for advice licensees to
follow. ASIC hopes this will establish a best practice for these programs, which previously had been ad hoc affairs designed almost entirely by organisations themselves.
"Licensees are required to act efficiently, honestly and fairly. Following our regulatory guidance will assist licensees to meet this obligation," said Ms
The proposed guidelines include the expectation that financial service providers will proactively try to identify potentially affected clients,
rather than waiting for victims to contact them. ASIC also suggests that review programs should look at advice for as far back as licensees have retained
records, even if it is from earlier than the mandatory retention period
The financial regulator also plans to close a mind-boggling loophole around record-keeping requirements. Advice licensees are required to keep records for
up to seven years. Some choose to outsource this to contracted third parties. However, when the time came to review customer advice during a review and
remediation process, licensees found they were unable to access their own customers' old records, since the contract had lapsed. ASIC proposes to amend the
rules to make it clear that licensees must not only retain records, but have access to them.
The final regulatory guide is set to be released in May.