ASIC reminds firms about their obligation to join new dispute resolution body

Maria Nikolova

As the new single dispute resolution body AFCA is about to start work on November 1, 2018, more than 300 licensed financial firms have not yet joined the scheme.

There is less than a week left before the new external dispute resolution body AFCA starts operating in Australia, taking over from the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.

Financial firms including AFS licensees that provide financial services to retail clients, credit licensees, most credit representatives, superannuation trustees and unlicensed product issuers are required by law to join AFCA. Some other firms operating under a licensing exemption may also be required to join the Australian Financial Complaints Authority (AFCA), including firms operating in the regulatory sandbox. The firms should have done so by September 21, 2018.

A press release published by the Australian Securities and Investments Commission (ASIC) earlier today, however, indicates that not all firms have acted to join the new single dispute resolution scheme.

There are more than 300 licensed financial firms who are still to join, and most of these are credit licensees who were previously members of the Credit and Investments Ombudsman. A number of credit representatives who must join the scheme are also yet to do so.

On the brighter side, over 35,000 financial firms required to join AFCA have now joined the scheme.

If licensees were not a member of AFCA as at September 21, 2018 they are in breach of their licence obligations and ASIC can immediately commence action to suspend or cancel their licence For credit representatives, if they are required to join AFCA but do not do so by 1 November 2018, their authorisation will become invalid and they will need to cease engaging in credit activities.

ASIC is receiving regular membership updates from AFCA and is contacting firms who have not taken out AFCA membership or responded to AFCA communications.

Let’s recall that, in early September, ASIC approved the AFCA Complaint Resolution Scheme Rules and the Terms of Reference of the AFCA Independent Assessor (IA).

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