Bad Apples Legislation


Everyone knows that one bad apple can ruin the whole barrel. And most people also know that the financial services industry has suffered through it’s fair share of bad apples; Those planners that peddle inappropriate or unprofessional advice to the detriment of their clients, or worse those planners, funds managers and advisers who have far less regard for their client’s wellbeing than they do for their own selfish gain – the fraudsters.

People and companies that deal in financial services products and advice are subject to a robust statutory licensing regime and must maintain strict compliance programmes. One of the primary aims of such onerous regulations is to ensure that the people working in the industry meet high standards of professionalism and competence. Unfortunately, too many bad apples have been able to take advantage of a reluctance on the part of employers and licensees to fully disclose the true reasons that a bad apple has separated from the employer, to allow the bad apple to move freely from one employer to the next and to poison the new employers barrel with his particular brand of rottenness.

Now ASIC together with Standards Australia have joined forces to protect the whole financial services barrel. On 11 October 2007 they issued Hand Book 322 - 2007 Reference Checking in the Financial Services Industry (the “Handbook”).  The handbook aims to assist financial services firms and licensees by providing a framework for checking references of people moving between jobs in the financial services industry. By implementing the framework throughout the industry it is expected that financial services participants can have more confidence in employing or engaging people by both seeking and providing reasonable, objective, relevant, factual, accurate and balanced information for reference checks, and that by doing so the bad apples will get weeded out of the industry.

The reference checking procedure is a three part process:

First - informing job applicants about the reference checking process by using the Information for Applicants: Reference Checking sheet contained in appendix A to the Handbook;
Second - obtaining an applicants express written consent using the Consent Form in appendix B to the Handbook; and

Third - facilitating reference checking between industry participants through sharing and relying on answers to specific questions as directed by the applicant by using the Direction Form in appendix C to the Handbook.

We have reviewed these documents and believe their use in the financial services industry will go a long way in rooting out the bad apples from the industry. Employers and Licensees will be able to confidently disclose relevant and factual information surrounding an employee’s separation from a company, without the previous fear and reluctance that a potential misrepresentation or defamation suit could arise.

If you would like help in implementing a compliant reference checking regime or have any queries concerning reference checking or the Handbook, please give us a call on 8296 6222.