The Australian Securities and Investments Commission (ASIC) has warned insurance brokers and financial planners about their use of the term “independent” after it found 21 cases of its misleading use.

A recent ASIC surveillance project found 17 general insurance brokers, one life broker and three financial planners had made statements about the independence of the licensee or their services in breach of the Corporations Act.

All the licensees have removed or amended the statements at ASIC’s request.

Australian financial services (AFS) licensees are prohibited from using the terms “independent”, “unbiased” or “impartial” if they receive commission or volume-based payments.

In one instance, ASIC found the statement on the website of an authorised representative. AFS licensees must ensure that authorised representatives’ published statements comply with the Corporations Act.

ASIC says it conducted the survey to assess the extent of the problem after receiving a complaint.

“This action puts the broad financial services industry clearly on notice about ASIC’s expectations,” Commissioner Peter Kell said. “Where we find incorrect information about independence we will be taking stronger action, including publicly naming the licensees involved.

“We will not tolerate [clients] being misled on the important issue of the independence of financial system gatekeepers such as financial advisers and insurance brokers.”

National Insurance Brokers Association (NIBA) CEO Dallas Booth told insuranceNEWS.com.au there is confusion about the relationship between broker and client.

“Regardless of how brokers are remunerated, they’re acting on behalf of their client and taking their client’s interests to market,” he said. “I would have thought that has elements of acting in an independent manner.”

Even so, he says it is incumbent on brokers to respect the Corporations Act.

Mr Booth says he will alert NIBA members, but he is disappointed ASIC made its announcement without first telling NIBA.

Association of Financial Advisers CEO Richard Klipin agrees advisers must know the law, but says he understands the confusion.

“Most advisers use the term ‘independent’ to refer to whether they’re institutionally owned or independently owned and that’s why there’s a misunderstanding,” he told insuranceNEWS.com.au.

“I think collectively there’s a need to educate advisers. There may be some misunderstanding that needs to be set right and I think the steps ASIC has taken will set that right.”