AFCA Rules change following ASIC issuance

The Australian Financial Complaints Authority (AFCA) has amended its Rules to provide clarity for consumers and financial firms regarding it’s jurisdiction to receive complaints about the conduct of an authorised representative of an AFCA member.

The Rules change is a result of a legislative instrument issued by Australian Securities and Investment Commission (ASIC) on 5 January 2021 requiring AFCA to update its Rules.

National Insurance Brokers Association (NIBA) legal counsel, Mark Radford said, “This is relevant to any licensee that has any complaint received by AFCA before 13 January 2021,  that involves the conduct of its representative acting without its authority.”

On 26 November 2020, in the matter of D H Flinders Pty Ltd v Australian Financial Complaints Authority Limited [2020] NSWSC 1690 the court found that the AFCA scheme rules did not confer on AFCA authority, jurisdiction or power to deal with complaints against a licensee member, involving conduct of a corporate authorised representative of the licensee member acting without authority from the licensee.

Radford explained that as a result of the findings, AFCA has amended Section E of the Australian Financial Complaints Authority Complaint Resolution Scheme Rules (scheme rules) by reason of ASIC Corporations (AFCA Scheme Regulatory Requirement) Instrument 2021/0002 to set out a new definition of:

  • Representative – “…means any person or entity for whose conduct a Financial Firm is or may be liable, including but not limited to a representative within the meaning of the Corporations Act, and a credit representative within the meaning of the National Consumer Credit Protection Act 2009.”
  • Financial Firm – “…4.For the purposes of rule B.2, A.7.1, A.7.2 and A.7.6 in relation to a complaint other than a Superannuation Complaint, “Financial Firm” also includes any employee, agent or contractor of the Financial Firm, any Representative of the Financial Firm regardless of whether the Representative’s conduct is within or without authority, and without limiting the foregoing, any other person who has actual, ostensible, apparent or usual authority to act on behalf of the Financial Firm or authority to act by necessity in relation to a financial service.”

The updated AFCA Rules apply to complaints received by AFCA from 13 January 2021 onwards. Complaints received before 13 January 2021 will be handled by AFCA under the previous Rules.

AFCA is currently reviewing a very small number of complaints received before 13 January 2021 which are potentially impacted by the judgment and is in contact with those complainants and financial firms to discuss the specifics of their complaint.

For the small number of complaints which may be outside AFCA’s Rules, AFCA will be encouraging the financial firms involved to consent to AFCA considering the complaint to achieve an early resolution and avoid the prospect of potential court or other action by the complainant.