Advisers cutting corners may be making binding nominations invalid: ASIC

ASIC has put the financial advice sector “on notice” for cutting corners on superannuation Binding Death Benefit Nominations (BDBNs), in particular around witnessing.

ASIC says it has become aware of a “widespread practice” among financial advisers of witnessing, or having staff witness, the signing of Binding Death Benefit Nominations by clients without being present. In some cases binding nomination forms have been backdated.

“Each of these practices fails to comply with the law and may lead to the nominations being invalid,” said ASIC.

“Improper and unethical practices around binding death nomination forms can lead to very poor consumer outcomes,” said Acting ASIC Chair Peter Kell.

“Advisers, licensees and their staff who engage in these practices should consider this a final warning. AFS licensees have ultimate responsibility for the conduct of their representatives and need to effectively monitor and supervise their representatives.”

ASIC said that: “Australian financial services (AFS) licensees and advisers have a professional and legal obligation to comply with the law.”

“Improper witnessing of the form can make it invalid, resulting in the death nomination being rejected. The trustee may then choose to exercise its discretion in a manner other than in accordance with the account holder’s nomination, causing delays and uncertainty about the payment of the death benefit.”

“Taking short cuts which result in important forms being invalidated and thereby jeopardising the account holder’s wishes does not meet the minimum advice and conduct standards expected by ASIC.”

ASIC said that Australian Financial Services licensees must:

  • Train staff on their professional and ethical obligations
  • Monitor and supervise their representatives
  • Remediate consumers where misconduct is found
  • Identify breaches in a timely manner

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