The Australian Securities and Investments Commission (ASIC) has finalised its reference checking and information sharing protocol for advisers, taking into account industry feedback from a consultation it launched last November.

ASIC last week released details of the protocol - which applies also to mortgage brokers - setting out obligations for Australian financial services and credit licensees.

The reference checking and information sharing protocol is a Hayne royal commission reform measure that will take effect on October 1.

The royal commission proposed the measure in its 2019 final report after it found licensees were not doing enough to share information about the background of prospective financial advisers.

“The ASIC Protocol sets out obligations for licensees to undertake a reference check and share information on an individual seeking to be employed or authorised as a financial adviser or mortgage broker,” the corporate regulator said.

“The reforms will promote better information sharing about the performance history of financial advisers and mortgage brokers, focusing on compliance, conduct and risk management.”

In relation to the advice profession, ASIC says the protocol applies to a “recruiting licensee” that is defined as one who is considering employing or authorising a prospective representative as a financial adviser.

It applies also to a “referee licensee”, meaning a prospective representative’s current and/or former licensee(s) in the last five years from whom a reference is sought.

While the protocol does not prohibit the employment or authorisation of a prospective representative, ASIC says one will need to consider and be able to demonstrate that they have complied with their general conduct obligations as a licensee if they decide to employ or authorise the prospective representative.

The protocol also does not prohibit employing or authorising a prospective representative if one has taken reasonable steps and a referee licensee fails to comply with their obligation to give the reference as requested or if a reference contains adverse information about a prospective representative.

“In these circumstances, you will similarly need to consider, and be able to demonstrate that you complied with, your general conduct obligations if you decide to employ or authorise the prospective representative,” ASIC says.

Click here for the protocol information sheet and here for the ASIC example of a completed template reference request for an adviser.