June 2002 Volume 83 Number 6 "serving the protectors"
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By Ruth McCance, ASX Investor Education

The relationship between investors and stockbrokers has come under the spotlight in recent weeks. There has been publicity both in the United States and locally about the responsibilities that advisers employed by stockbroking firms have toward their clients, and how in some cases these responsibilities have not been met.

The relationship you have with your broker or financial adviser should be a rewarding one, in which your confidence in the service you receive is justified. But what can you do if you have a complaint about the advice you have received, or about some other aspect of the relationship with your broker?

In the first instance, you should always take up any complaint directly with your broker. The Australian Securities and Investments Commission (ASIC) requires all holders of a financial services licence (all stockbrokers must hold such a licence) to have an internal complaint handling procedure.

The first point of contact should be your adviser, or the person you normally deal with at your stockbroking firm. If your adviser cannot resolve the problem immediately, ask how much time he or she will require. If you have not heard from him or her by this time, contact the firm again and ask to speak to the complaints manager.

ASIC’s website (http://www.asic.gov.au) gives three tips for investors making complaints:

• Be ready to explain what your complaint is about and ask for help if you need it.
• Don’t be afraid to ask what is happening with your complaint.
• Be resilient: don’t be put off if your complaint is not resolved immediately.

In an ideal situation, your complaint will be resolved satisfactorily by your stockbroker. If your complaint is reasonable, most firms will be keen to avoid involving third parties. If, however, your stockbroker is unwilling or unable to resolve the problem, there are other courses of action available to you.

Stockbrokers who provide advice to retail investors are required to belong to an approved complaints resolution scheme under the conditions of the licence granted to them by ASIC. The only complaints scheme presently approved by ASIC for the stockbroking industry is the Financial Industry Complaints Service Limited (FICS).

FICS might ask you to detail your complaint in writing. It will then contact the broker and follow through to ensure you receive an appropriate response. Most complaints reaching FICS are resolved by investigation, negotiation or conciliation.

FICS can determine financial compensation for valid complaints, with that compensation limited to the extent of your loss. FICS does not award damages or punitive costs. The decision made by FICS is binding on the broker, but is not binding on you. Therefore you are free to reject the decision and take subsequent legal action against your broker. Bear in mind that the costs of legal action might be substantial, whereas the service provided by FICS is free of charge. For further information on FICS, refer to its website at http://www.fics.asn.au.

Depending on the nature of your complaint, it may also be appropriate to contact the Australian Stock Exchange (ASX). If you believe your broker has acted dishonestly, fraudulently, unfairly or incompetently, you should advise ASX. ASX will endeavour to resolve your complaint, and may take disciplinary action against the broker if it determines that the broker has breached ASX Business Rules. ASX is not able to obtain financial compensation for you from the broker. If you are seeking financial compensation, you should refer your complaint to FICS if it has not been resolved in the first instance by your broker.

It is also important to understand that ASX cannot take action on financial losses which are the result of an investor’s mistakes, bad judgment or risk-taking.

Finally, you may also lodge a complaint with ASIC, which can deal with matters involving dishonesty, fraud, unfairness or incompetence by stockbrokers.

Hopefully, your relationship with your broker will be a beneficial one for both parties, and you should not need to take any of the above courses of action. It is, however, useful to know the options available to you should they be required.

This article was prepared with the assistance of the ASX Investor Education unit. It is not intended as investment advice or as a recommendation of specific securities. For more information, phone ASX Customer service on 1300 300 279 or go to the ASX website: asx.com.au

This article contains general information only. It is not intended as and must not be relied upon as investment advice. You should consult a licensed professional advisor prior to making any investment decision.

The information contained in this article is provided in good faith and derived from sources believed to be accurate as at the date of publication. However, no warranty of accuracy or reliability as to such information is given. Australian Stock Exchange Limited and its associated and related companies will not be liable for any loss or damage arising in any way from or in connection with anything provided in or omitted from this article or from any action taken or inaction in reliance on the article. This article does not contain an invitation or offer to invest in securities or other financial products and nothing in this article is to be taken as ASX endorsing promoting or expressing any opinion on any securities or other financial products.

©Australian Stock Exchange Limited ABN 98 008 624 691. All rights reserved.

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