The Association of Independently Owned Financial Professionals (AIOFP), an organisation of non-institutional dealer group chiefs, has made a submission to the Financial System Inquiry, calling on it to investigate and potentially alter the role ASIC plays in the registration and distribution of PDSs created by product manufacturers.
“ASIC [has] publicly announced on many occasions in the past that any new PDSs are only registered with ASIC before market release; they are not scrutinised by ASIC,” the submission states.
“Unfortunately, not many of us have listened. Even senior members of the [financial services] industry and, understandably, consumers have wrongly assumed that product structure and background checks on key [personnel] were performed upfront by ASIC before market release.
“This misconception has subconsciously been ticked off by many as the ‘first filter’ mechanism in the market credibility process.”
The submission contends that ASIC should have a “more active” role in the management of the PDS approval process, in order to avoid cases such as the Westpoint collapse, which the submission says is a “prime example” of the misconception in practice.
The AIOFP proposes a levy on advisers, nominally listing a hypothetical annual fee of $1,000, which would fund a “panel of research houses” that would “examine new PDSs before market release i.e. business model sustainability, director profile and background, likelihood of success etc” thereby effectively ending the need for research houses to “seek funding from product manufacturers to survive”.
“FOFA has not addressed these weaknesses,” the submission states, speaking directly to the issues of PDS confusion and conflicted research house ratings.
“Product failure history will continue to repeat itself unless meaningful structural change is implemented,” it said.
