What is this consultation about?
AFCA is consulting on a draft investments and advice related Approach document – the AFCA Approach to determining compensation in complaints involving Financial Advisers and Managed Investment Schemes.
What is the consultation period?
The public consultation process will run from Monday 6 November 2023 until Friday 1 December 2023.
How can I provide my feedback/submission?
AFCA invites all stakeholders to provide feedback or make a submission through one of the following channels:
- email general questions and comments to us at firstname.lastname@example.org
- send us a written submission by emailing email@example.com
- post/mail us a written submission addressed to:
Lead Ombudsman – Investments and Advice
Australian Financial Complaints Authority
GPO Box 3
Melbourne VIC 3001
AFCA will also meet with directly impacted stakeholders and will take feedback during these engagements.
Are submissions anonymous?
Submission will be published on AFCA's website. Please note, we will not treat your submission as confidential unless you specify that a part or all of it is confidential.
You may choose to remain anonymous when making a written submission. However, if you decide to remain anonymous, we will not be able to contact you to discuss your submission should we need to.
What if I have accessibility needs?
AFCA is committed to providing a service that is accessible to everyone, including giving you the information you need, in a format that works for you. In line with the Disability Discrimination Act 1992 (Cth), AFCA is also committed to ensuring that our information and services are provided in a non-discriminatory way. If you have accessibility needs, please email us at firstname.lastname@example.org, or call us on 1800 931 678 to tell us about any additional assistance you might need. We welcome the opportunity to discuss the types of assistance we can provide or facilitate, to help you interact with us.
What is an AFCA Approach document?
AFCA’s Approach documents help complainants and financial firms better understand how AFCA might approach some common issues and complaint types, and how we reach decisions. We publish our Approach documents on our website.
Why has AFCA created an Approach to determining compensation in complaints involving Financial Advisers and Managed Investment Schemes?
AFCA has developed a formal Approach document on this matter to support complainants and guide financial firms to better understand how we consider investment and advice complaints involving financial advisers and Managed Investment Schemes, and to assist in efficiently and effectively resolving these disputes. It has also been developed so that AFCA’s approach is consistently applied by case managers and decision makers.
What is the purpose of this Approach document?
AFCA can deal with complaints against advisers and Responsible Entities (REs) involving MIRs which may arise before or after the failure of the MIS. The purpose of this Approach document is to explain how AFCA determines and allocates liability and compensation in such matters. The Approach document provides an explanation of AFCA’s current approach to such issues.
In considering this approach, it is important to remember that each AFCA complaint has a unique set of facts, and the information in the Approach document is a guide only. We will always consider the individual circumstances of a complaint in determining an outcome.
What existing processes and guidelines does AFCA have in place for investment and advice complaints?
AFCA has existing guidelines and documents to support the efficient handling of complaints involving financial advice. This guidance includes the AFCA Approach to calculating loss in investment and advice complaints, and the AFCA Approach to identifying a claim. These documents outline how AFCA decision makers work out how much compensation to award when a loss to a complainant is found to have been caused by a financial adviser.
If AFCA has existing processes and guidelines in place to handle these types of issues, why has it developed this formal Approach document?
AFCA has developed the Approach document to formally outline its process in handling these matters, and to provide clearer guidance to parties.
While AFCA has always considered the apportionable nature of a claim and the legal principles of apportionment when determining multi-party investment and advice complaints, AFCA has not documented its approach to these complaints in a formal way – until now. Historically, this is how AFCA’s decision makers have handled questions of liability when handling these complaints.
Is this Approach new? Does this change how AFCA handles these types of complaints?
While the Approach document is new, the way AFCA handles these types of complaints, and assigns appropriate liability in multi-party investment and advice complaints, is not.
The new Approach simply documents and explains our existing procedure, and the principles we may have regard to – such as proportionate liability statutes – when making decisions, apportioning liability, and awarding compensation for a loss.
These legal principles, and the obligations of financial advisers outlined in the Corporations Act, are not new.
What is a multi-party complaint?
A multi-party complaint is where there may be:
- two or more complainants provided with the same financial service both individually and jointly, which gives them both the right to bring the same complaint to AFCA; or
- more than one financial firm responsible for the financial service(s) and/or liable to compensate the complainant(s).
What are AFCA’s powers to join a party to a complaint?
If a complainant has brought a complaint against one party and AFCA is of the view another party may be partially or wholly responsible for the complainant’s loss, AFCA has the power under Rule A.6.2 to join the other party to the dispute to ensure we can bring finality to the complaint. We can only do so if that party is a current member of AFCA.
What about multi-party complaints in other product areas, such as banking and finance? Does this approach cover such matters?
Multi-party complaints can arise in other areas of AFCA’s jurisdiction, outside of the investments and advice area. For example, a multi-party complaint may arise in our general insurance area (e.g., a complaint involving an insurance broker and insurer) or in our banking and finance area (e.g., a dispute is brought against a mortgage broker and lender). The AFCA Approach to determining compensation in complaints involving Financial Advisers and Managed Investment Schemes does not directly consider such situations.
What are proportionate liability statutes?
Australia’s Federal, State and Territory jurisdictions have proportionate liability laws to assist in deciding, for certain types of claims, the amount of compensation payable by each concurrent wrongdoer in a multi-party court proceeding.
Has AFCA always considered proportionate liability statutes in its decision-making for these types of complaints?
When making decisions, AFCA must have regard to the law, industry codes, fairness, and standards of industry practice that were in place at the time of the conduct. This means proportionate liability statutes have been, and continue to be, among the legal principles AFCA has regard to when determining compensation in complaints involving financial advisers and Managed Investment Schemes.
Are proportionate liability statutes the only consideration in these matters?
No. As well as regarding the law, industry codes and standards of industry practice, AFCA’s decisions are intended to reflect what is fair in the circumstances of each complaint. This obligation requires us to ensure there is a fair outcome, where we find the financial firm made an error or breached an obligation to the complainant.
AFCA will apply the proportionate liability statutes to multi-party matters in accordance with its Rules. However, if application of the statutes results in an unfair outcome, AFCA may determine not to apply them. This would be rare, but parties would be given the opportunity to provide a submission on this issue.
More information and further questions
If you have further questions about the Approach or consultation, or need more information, please email email@example.com.