The Australian Financial Complaints Authority (AFCA) has been in operation for almost three years. In that time, the scope of its jurisdiction has been increased several times, broadening the prospect of licensees and authorised representatives finding their activities the subject of a complaint to AFCA.
We have previously warned readers about treating AFCA complaints with caution. Now, partner Selina Nutley recaps the current limits of AFCA's jurisdiction and explains why it is so important a complaint is closely examined from the outset to ensure it can be considered by AFCA.
It is common for people to focus on AFCA's monetary jurisdiction – now sitting at $1,085,000 for investment complaints – as the sole determinant of AFCA's jurisdiction. However, there are several other circumstances which fall outside AFCA's jurisdiction. Those circumstances include where the complaint concerns:
Additionally, AFCA has discretion to exclude a complaint in various circumstances, including where:
While the above circumstances act as a limit upon AFCA's ability to consider complaints, in our experience, AFCA does not always undertake a critical analysis of whether a complaint falls within its jurisdiction. Rather, it often waits for issues with jurisdiction to be raised by the licensee. We have seen instances where AFCA has continued to investigate a complaint even though it clearly exceeds AFCA's monetary jurisdiction, without seeking consent of both parties. We have also seen instances where licensees have unsuccessfully challenged AFCA's jurisdiction, yet when we have become involved, AFCA has reversed its decision.
Given parties cannot rely on AFCA to automatically exclude complaints which exceed its jurisdiction, it becomes even more important for licensees to actively and thoroughly turn their minds to this issue as soon as the complaint is received. Failing to do so may lead to AFCA proceeding to investigate the complaint, and making findings as to compensation, which could have been avoided. Licensees cannot adopt a 'wait and see approach' as the circumstances where AFCA's determinations can be set aside are extremely limited.
You also need to be aware that:
Our experience in developing compliance and risk solutions for fund managers ensures we are well-placed to help you address and mitigate any potential issues.