It isn’t only general insurers who are worried about some aspects of the Australian financial services licence system. The Association of Financial Advisers (AFA) wants to know how consumers will be protected from the consequences of a licensee having its licence suspended or cancelled under the Financial Services Reform Act (FSRA).

The AFA has sought urgent clarification from the new minister responsible for the FSRA, Parliamentary Secretary to the Treasurer Ross Cameron. AFA President Robin Yates says no one seems to care about the impact of such an action on consumers and licensees.

“The powers given to rhe Australian Securities and Investments Commission (ASIC) are so extreme that they have the potential to destroy the financial objectives of consumers at the stroke of a pen,” he said.

He said the FSRA gives ASIC laws that are far tougher than those which guided the old Insurance and Superannuation Commission. “ASIC can, without having to apply to a court, suspend the licence of a licensee.”

While he agrees that ASIC says such an action would be taken only in extreme circumstances, Mr Yates says the effect of such a suspension is that every authorised representative of the licensee is immediately also suspended, “regardless of whether an individual representative is guilty of any misconduct or not”.

“Even if courts later reinstate the licence, clients’ financial objectives, representatives’ practices and licensees’ businesses and reputations [would be] in ruins by that time. The damage may run into many, many millions of dollars. They may be incalculable.”