ASIC has accepted an enforceable undertaking (EU) from one advice firm following concerns about the adequacy and application of its risk management and compliance frameworks, warning it will continue to supervise newly appointed authorised representatives.
Under the EU, NEO Financial Solutions – which provides tax and financial advice services – will engage an independent expert to assess, report and make recommendations about NEO’s risk management and compliance frameworks.
According to an announcement from ASIC this morning, the EU follows surveillance from the corporate regulator of NEO's business.
The surveillance focused on NEO’s general obligations as an Australian financial services (AFS) licensee, with a review of its compliance and risk management framework, including its programs, policies, procedures and controls.
ASIC’s surveillance also tested financial product advice provided to retail clients and the internal advice audits and remediation reviews conducted by NEO.
“ASIC's advice concerns included failing to address important client objectives, not making reasonable inquiries to determine all relevant client circumstances and not fully considering the consequences when replacing existing financial products,” ASIC said.
“ASIC's surveillance indicated that NEO failed to employ appropriate risk management and compliance frameworks having regard to the nature, size and complexity of its business, which had grown considerably since its inception.”
Specifically, in ASIC’s view NEO had audit and remediation programs that were not timely or effective in identifying and remediating advice conduct and deficiencies.
“As this matter shows, inadequate risk management and compliance frameworks, combined with deficient application of a licensee's systems and controls, can result in the provision of advice that does not serve the best interests of clients,” said ASIC deputy chair Peter Kell.
“ASIC is committed to raising standards across the financial services industry. We expect licensees to dedicate sufficient resources to appropriately monitor and supervise high-risk and newly appointed authorised representatives and to remedy poor advice in a timely manner,” he said.
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