The Stockbrokers Association of Australia (SAA) yesterday issued a statement “challenging” the premise of FSI recommendation number 24, which called on ASIC to review current remuneration models in the stockbroking industry.
“In recent years, ASIC has identified compliance issues in the stockbroking industry,” the FSI final report states.
“The inquiry is aware of concerns with the prevalence of ‘grid’ commissions for advisers, where commission-based remuneration is received soon after advice is given, with the potential to create a conflict of interest between the adviser and the consumer.”
The report suggests that a formal review of this practice should be conducted, and that – should the concern remain unaddressed – the Corporation Act definition of “conflicted remuneration” be extended to stockbroking professionals.
In response, the SAA argues that the focus on stockbrokers is unjustified, given the sector’s compliance record comparative to other corners of the financial services industry.
“In recent years, the level of complaints against stockbrokers lodged with the Financial Ombudsman Service has remained very low,” the statement said.
“Existing arrangements for stockbroker remuneration do not present any risk of being conflicted remuneration.”
The SAA added that the inquiry should be “commended generally” on its findings, but reiterated that “in this one instance, the [SAA] believes that the evidence relied on does not justify the conclusion that was reached”.
A footnote to the recommendation suggests that the enforceable undertakings entered into by Macquarie Equities in 2013 and UBS Wealth Management in 2011 serve as justification for the FSI’s suggestion.
