As well as highlighting the inadequate regulatory structure for property-based investment schemes, the Westpoint collapse has led to discussion of other underlying regulatory issues — namely:
Recently, ASIC released a discussion paper with case studies and practical suggestions for how licensees may manage conflicts of interest. This demonstrates ASIC's heightened surveillance of conflict-related issues — and potentially greater enforcement action. The discussion paper can be downloaded from www.asic.gov.au/ppp
ASIC has requested submissions in response to the discussion paper — which may lead to revisions of ASIC's Policy Statement 181 "Licensing: Managing Conflicts of Interest". That policy supports the law on the duties of AFS Licensees to manage conflicts, see Section 912A(1)(aa) of the Corporations Act 2001 (Cth).Commissions v Fee for Service
ASIC's policy statement refers to the problems associated with licensees being remunerated on a commission basis — and the challenges this presents for managing conflicts of interest.
There is increasing media discussion of the relative merits of the fee for service model as an alternative to a commission model. Even, the Financial Planning Association's "Principles for Managing Conflicts of Interest", although not endorsing a fee for service model, emphasises the importance of financial planners separately identifying financial planning advice fees. Often these fees are difficult to determine, for instance if they are reflected in reduced rates of return from managed funds.
Julian Smith is a partner in the Maddocks Commercial team.
Julian advises extensively in the following areas:
Julian advises clients ranging from public companies servicing the wholesale financial services market to high net worth individuals and their advisers.
Julian has been with Maddocks since undertaking articles in 2001.
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