Australian Financial Complaints Authority increases transparency
From July 1, 2019, all new AFCA decisions will include the names of the financial firms involved.
In a move set to boost transparency and accountability to the public, the Australian Financial Complaints Authority (AFCA) will soon put an end to the practice of publishing decisions about financial firms in an anonymised way. The change was announced in the latest Newsletter of the dispute resolution scheme published earlier today.
AFCA already publishes regular updates on its statistics and all its decisions. This is currently in an anonymised way. However, from July 1, 2019, after AFCA has amended its Rules, all new decisions will include the names of the financial firms involved.
In addition, the body will publish detailed six-monthly reports on its work, the definite systemic issues it is identifying and the firms involved, and comparative tables of the complaints accepted and resolved by financial firms.
AFCA is currently investigating 42 definite systemic issues. The scheme has also identified 11 potential serious contraventions and other breaches.
An interesting case study concerning a CFD broker (an unnamed one) is mentioned in the latest newsletter.
AFCA says it received complaints from clients who opened Forex trading accounts with a financial firm and started trading over-the-counter contracts for difference. As this type of trade is highly complex and risky, ASIC requires a high standard of disclosure is made to investors and for all prospective clients to meet several benchmarks – including minimum qualification requirements – before an account can be opened. The complaints centred around inappropriate investment advice from the financial firm, but all complainants were found to lack investment trading experience. The Systemic Issues team investigated whether the financial firm was applying the client qualification benchmarks appropriately.
It was found that the financial firm had a phone script that was read to prospective clients just prior to their online assessment for suitability to trade. The script provided information to assist the customers in responding to the questions. The online assessment additionally gave access to ‘more information’ via a button, to help clients during the test.
AFCA found the proximity of the phone script to the online assessment and the additional assistance provided by a ‘more information’ button to be akin to ‘coaching’. The financial firm removed their phone script and amended the client qualification assessment to increase difficulty.
