ASIC calls out licensees: 'We will take action'

Australian Securities and Investments Commission (ASIC) commissioner Alan Kirkland issued a blunt warning to licensees not meeting their obligations.

Speaking at an industry event, Kirkland said the regulator has spent two years warning licensees to lift their game when it comes to compliance with the reportable situations regime, and from now on its focus will be on enforcement.

"The regime has now been in effect for almost three years - but the proportion of licensees that have submitted a report is very low, which suggests some still may not be complying with their obligations," Kirkland said.

"There has been little improvement on this since our first report on this in 2022, which is one of the reasons we have made it an enforcement priority for 2024.

"Our surveillance on this remains active and ongoing but we have spent the past two years warning licensees to lift their game - and my message today is that we're not going to spend the next two years doing the same.

"Where we find evidence of non-compliance, we will take the appropriate action - including enforcement action, where necessary."

In addition to issuing the stark warning, Kirkland also gave his thoughts on the experienced provider pathway and its aim to retain experienced advisers in the industry.

"We have recently issued new guidance to support advisers and licensees to access the pathway," he said.

"We have also updated our IT systems, so from July 1, licensees can begin lodging notifications where they have received a written declaration from an adviser who is relying on the pathway. I hope that that is a relatively simple process but as always, our team is happy to answer any questions you may have as you engage this process."

Kirkland also reaffirmed that ensuring good retirement outcomes was a strategic priority for the regulator this year and that will continue into next year as well.

He said that while good retirement outcomes are not all about advice, it does have a big role to play and the Superannuation choice products: What focus is there on performance? (Report 779) which was released in February, shows there was more work to do.

"In this report, we examined the practices of advisers, licensees and superannuation trustees in situations where choice products had persistently underperformed against the benchmarks disclosed in their product disclosure statements (PDS)," he said.

"I just want to emphasise that point - this was about the benchmarks set in the product's product disclosure statements and it was about persistent underperformance, not over one or two years."

Kirkland said ASIC found that in some cases, clients were not told their investment options were consistently underperforming and that there were better alternatives available.

"To be really clear, it is not our view that underperformance over a period should automatically result in a recommendation to switch products. That's not feasible - and it's not always going to be in the best interest of clients," he said.

"But persistent underperformance should be identified and considered - and we were looking for evidence that was happening. For licensees, that means having processes in place to detect and deal with persistent underperformance in a timely way."