Running a Public Company as Complicated as Freeman Fox required skill, experience and constant training and growth.
Freeman Fox held a number of licenses including an Australian Financial Services License and was a Participating Organisation of the Australian Stock Exchange as well as Members of the Mortgage Institute of Australia and Licensed Real Estate Agents in Queensland and NSW.
Losing any of those licences was a business ending event so we took compliance with the law very seriously.
To handle all the Compliance necessary Freeman Fox had a full time and highly experienced Compliance Officer as well as External Compliance Consultants and Auditors.
We were in regular communication with both The Australian Securities and Investment Commission (ASIC) and the Australian Stock Exchange (ASX) who not only conducted their regular random inspections, compliance visits and specific issues conferences but also assisted us with the myriad of complexities of the innovations Freeman Fox created over the years it operated.
Our Compliance Officers were all very experienced, highly qualified and capable people backed up by Responsible Officers, Managers and Executives with considerable industry experience.
In addition our Independent Directors took a keen interest in compliance matters as they were personally responsible for these matters legally.
To that end they received regular monthly compliance reports from our internal Compliance staff, our Compliance Committee and on a six monthly basis external Compliance Consultants and annually from our Auditors.
to give you an indication of the types of systems, procedures, checks, management and compliance protocols Freeman Fox had in place, here is an extract from the Freeman Fox Operations and Procedures Manual – 2008
FFL has outsourced several functions relating to the provision of financial services to related and external service providers. The FFL Board has established and will maintain an appropriate and effective outsourcing function within the organisation and will ultimately be responsible for ensuring service providers meet their contractual obligations.
The outsourcing policy sets out provisions for the following: selection criteria for suitable service providers; ongoing monitoring of performance of service providers; procedures for dealing with a breach of a Service Level Agreement or an AFS licensee obligation; and procedures for dealing with conflicts of interest.
The General Manager will be responsible for monitoring performance of outsourced functions via management reporting and assessment of performance against contractual obligations. All outsourced functions will be subject to an annual review.
Computing and Information Technology
XPLAN Technology is an independent software company dedicated to providing financial planning businesses with an enterprise solution to professionally and efficiently meet the needs of our clients. FFL uses a licensed version of Xplan known as Foxplan.
IRESS Market Technology is a principal supplier of share market and wealth management systems in Australia. IRESS have a reputation for producing innovative, sophisticated systems for all types of financial market participants. FFL Stockbroking utilise IRESS software in the advising and dealing function.
Aegis is one of Australia’s leading research firms, providing incisive and rigorous securities analysis to investment advisers throughout Australia. Aegis provides FFL with unbiased and objective fundamental equities research on the Australian investment market. Aegis is now a market leader in providing research solutions to the investment community. Aegis prides themselves on the quality and independence of its analysis which is underpinned by high calibre staff and a transparent research methodology.
Van Eyk Research specialise in qualitative managed fund research. Van Eyk Research provides professional advice to FFL on fund manager selection, portfolio construction and asset allocation for clients with different risk profiles. Van Eyk Research’s specialist research teams cover investment markets, the managed fund industry and shares.
Morningstar is a leading provider of independent investment research in Australia and in major international markets. FFL utilises Morningstar extensive range of Internet, software, and print-based products for financial advisers and individual clients.
Kaplan is a Registered Training Organisation and ASIC Authorised Assessor. Kaplan’s Ontrack training is used by FFL for the continuing professional development needs of its Advisers. FFL also utilize Kaplan’s educational courses for RG146 accreditation purposes. These courses can be undertaken through distance learning and workshops with many options to learn at an individual’s own pace.
FFL utilise E*TRADE Australia for its specialist skills in providing execution, settlement and clearing functions. By outsourcing what is essentially an administration function to E*TRADE Australia our business can concentrate on the value-added front-office functions of advice and client servicing. E*TRADE Australia provide development support for tools and services that would be costly for the business to build independently which frees up resources to grow the core business.
DATA MANAGEMENT & SECURITY SYSTEM
FFL takes its data management and security systems very seriously, and as a result have a number of controls and redundancies in place in the event of a breach, data loss or disaster. At the perimeter, the FFL network is protected by high end Fortigate firewalls which handle not only access control, but also deep packet inspection to protect against threats. The only external access to the FFL network is via encrypted Secure Socket Layer (SSL) or Virtual Private Network (VPN) tunnels whereby only authorised users are granted.
Password policies are require complex passwords on a 30 day rotation to prevent unauthorised access. All file shares are protected with the appropriate NT File Security (NTFS) access at the directory level, with logging setup on critical directories. Internet access is controlled closely, with access to external webmail hosts denied to ensure no data is emailed outside the organisation.
Client data is stored in an online CRM package called Xplan, which is the industry leader for Financial Services. This system is owned and developed by IRESS, and have all the appropriate safeguards for security and Disaster Recovery. In-house, FFL use IBM Tivoli Storage Manager for its data backup management, which initially backs up to disk, then offsite to tape. These tapes are picked up daily by a data security company which transport these under lock and key to their premises in the event of a disaster.
Risk is inherent in all the Group’s operational, commercial and administrative activities. Our goal is not to eliminate all risk but to manage risk through identification, assessment and active management of outcomes. We will maintain a risk management system appropriate to the level of risk considered acceptable by the Freeman Fox Ltd (“FFL”) Board of Directors (“Board”) and Management, which will be based on Australian Standard Risk Management AS/NZ 4360:2004. Our challenge is to apply risk management to all parts of FFL. By adopting the principles of risk management we will ensure that undesired impacts are minimised and opportunities enhanced. FFL is committed to developing a culture where risks that could affect our employees, the community, the environment, our operating assets, and/or our financial and legal status are identified and actively managed. FFL will manage such risks by:
- Complying will all regulatory requirements;
- Educating and involving our employees and stakeholders in the process of risk management;
- Prioritising risks according to likelihood and the consequence;
- Developing action plans which assign responsibilities and accountabilities to minimise high level risks;
- Incorporating risk management into FFL’s strategic plan, budget, and operating philosophy; and
- Undertaking regular reviews of the risk management processes to ensure continuous improvement.
The purpose of the RMP is to provide a framework for FFL to minimise the chance of loss and to maximise the opportunity for shareholder growth, by ensuring that managing risks is a primary part of day-to-day management of the business and to gain a better understanding of the organisation’s risk profile.
Specific risks covered within the RMP document include:
- Market risks (liquidity and funding, interest rate, and equity risks);
- Credit risks (financial markets credit and concentration risks);Insurance risks (general company insurances, excess levels, and self insurance); and
- Operational risks (personnel and occupational health and safety, settlement, technology, reputation, accounting and audit, legal, regulatory requirements and environmental risks)
The RMP should be read in conjunction with the Compliance Program and Monitoring Procedures. These documents combine to form a comprehensive risk management and compliance framework for FFL that will minimise compliance and other risks to consumers and the integrity of the markets within which FFL operates. The RMP will be communicated to all staff. The Chief Financial Officer (“CFO”) assisted by the Compliance Manager will develop a process to educate relevant staff on risk management.
The RMP applies to all risks and risk management activities of FFL. This document, the Risk Management System Statement, addresses risks and risk management activities relevant to the AFSL (specifically, provisions in Chapter 7 Financial Services and Markets Corporations Act 2001) and the ASX Market Rules, as they apply to Market Participants. All RMP requirements are mandatory unless the Board approves a specific written exemption.
Risk management is an important component of effective corporate governance and contributes to good governance in a variety of ways, including:
- Providing a rigorous basis for planning through a structured consideration of the key risks;
- Allowing for informed judgments by providing a systematic identification of risks;
- Providing protection through reducing the likelihood of expensive surprises;
- Providing a mechanism for formalising and coordinating existing risk management practices within the group;
- Being based on prevention rather than response; and
- Providing greater openness and transparency in decision making and the ongoing management processes.
This document is the FFL master policy under which all FFL policies are developed and approved. Additional FFL policies may be developed to cover risk areas in more detail than are set out in the RMP document. An example of such a policy is the Risk Management Systems Statement. All approved policies form a part of FFL’s risk management process. In the event of a conflict between the requirements of the RMP and the requirements of another FFL policy, the RMP will be taken to apply, except where a specific written Board exemption has been granted.
All FFL policies will:
- Follow uniform FFL naming conventions;
- Be stored on a secure FFL directory with limited update access;
- Be easily accessible by the majority of relevant FFL officers; and
- Be approved by the Board prior to implementation and/or promulgation.
Approval and Review of Policy
The RMP is approved by the Board and is in force until rescinded or altered by the Board.
Recommended changes to the RMP must be presented to the Board on a timely basis to ensure the policy is maintained at all times. The Board must approve amendments to the RMP.
The RMP is to be the subject of review at the following times:
- Annually in conjunction with the business planning cycle;
- When a significant change in business strategy or direction is planned;
- When a significant change in the business environment occurs;
- The introduction of a new business line or service; and/or
- As new risks to the business emerge.
The CFO is responsible for ensuring that the RMP is presented to the Board for review, and that the Board is informed either of the continuing suitability of the policy or recommended changes to the policy. The revised RMP will be communicated to all staff by the CFO with the assistance of the Compliance Manager.
POSITIONS AND RESPONSIBILITIES
Board of Directors
The Board is responsible for:
- Ensuring FFL implements and maintains a risk management system, including policies, procedures, systems and monitoring mechanisms to provide accurate, timely and comprehensive risk management information to the Board;
- Monitoring compliance with the RMP, including via quarterly management reports and compliance statements from management;
- Approving amendments to the RMP, other corporate policies and related appendices;
- Approving specific written exemptions.
Corporate Risk and Compliance Committee
The Corporate Risk and Compliance Committee (“CRCC”) is responsible for:
- Reviewing the current risk position, including nature of risks within the FFL business portfolio and the sensitivity to potential changes in underlying business conditions, price levels, or other significant events;
- Establishing, approving and reviewing corporate risk management strategy;
- Ensuring that strategies and activities are in line with FFL’s broader objectives;
- Monitoring the risk management activities of associated entities and service providers, including specific exposures, transactions, and instruments used;
- Ensuring accurate, timely and comprehensive risk management reports are presented to the Board on a regular basis;
- Reviewing market, operational, credit and insurance risk matters as appropriate; and
- Approving recommended changes to the RMP for submission to the Board.
The General Manager is responsible for:
- Providing direction and leadership for the implementation of the risk management strategy;
- Ensuring adequate resources are assigned to manage the critical risk areas; and
- Ensuring the implementation and maintenance of a program to monitor and measure risk management activity and informing the CRMC of progress.
Breach of Policy
Any material breach of the RMP must be reported to the Board. The CFO must provide a compliance statement with each quarterly Board report specifying compliance with the RMP or detailing any breaches that have occurred and corrective action taken (if any).
Breaches of other FFL policies are to be reported to the Board and to Management. It is the responsibility of persons who detect any such breach to satisfy themselves that the breach has been reported to an appropriate person (usually the Compliance Manager), and that reasonable steps will be taken to report, rectify and/or approve any such breach.
The inherent limits on systems capabilities and staffing require broad discretion to be delegated to senior staff.
It is critical that risks are clearly understood, well reported and acceptable to the company. It is the responsibility of the CFO to ensure that all significant information and risks are reported promptly to Management, the CRMC and Board. FFL will at all times adhere to the terms and conditions of all regulatory requirements, covenants, restrictions, loan agreements or other related documents and agreements. FFL will endeavour to accurately identify and measure risks, and manage risk exposures on a net exposure basis, except where risks cannot be netted off or offset.
Managers of FFL will provide all Representatives with continual feedback on their work performance so that instances of unacceptable performance, non-attainment of standards or behavioral issues are promptly identified and corrected, thus minimising the need for disciplinary measures. The Disciplinary Policy and Procedures documents the course of action for managing identified solving, and be fully documented and recorded on the Representatives personal file. In circumstances where the disciplinary process fails to achieve the desired outcome termination procedures may be initiated.
Performance Coaching/ Development
FFL will take appropriate action when it is found that Representatives have not been operating in accordance with FFL policies and procedures. Managers are responsible for discussing work performance with Representatives so as to obtain the best possible individual and team outcomes. Performance coaching is a formal process of identifying and managing performance or behavioral issues.
Where performance or behaviour is unacceptable or they have failed to meet a standard, the Manager should:
- Ensure the Representative has a clear understanding of the precise area of unacceptable performance standard, or behaviour;
- Assist the Representative in investigating the reasons for the performance, standard or behavioral issue; and
- Assist the Representative to develop and implement a positive plan to improve their performance, standard, or behaviour.
The Manager should maintain objectivity throughout the coaching process. The Representative must understand the purpose of the coaching and the need for improvement. The Manager must record the details of the coaching session(s) including an agreed improvement plan and date(s) to review progress. A failure by the Representative to correct the unacceptable work performance, attain the required standard, or address behavioral issues will necessitate further coaching, or in some instances, disciplinary action.
EDUCATION, TRAINING & DEVELOPMENT
Representatives must be appropriately qualified and assessed as competent to provide financial services under the AFSL before being formally authorised to provide financial services on FFL’s behalf. To be authorised all new Representatives must provide the Compliance Manager with evidence of their educational qualifications, RG 146 accreditation, and training records that demonstrate ongoing compliance with training requirements.
The Representative Training Register records the relevant educational qualifications and RG 146 accreditation of those persons authorised to provide personal financial product advice to retail clients. FFL is an ASX Market Participant and governed by the ASX Business Rules (“Rules”). The Rules stipulate that only ASX Accredited Derivatives Advisers Level 2 (“ASX ADA 2”) are able to advise on Options and Instalment Warrants.
Entry Level Requirements – Training
Qualification SDIA Accreditation ASX Accredited Derivatives Adviser Level 1 and 2
Wealth Club (including Franchisees)
Diploma of Financial Services (Financial Planning)
All: Company Induction Program
The Continuing Professional Development Program (“CPD”) training is delivered using Kaplan Education Pty Limited’s (“Kaplan”) Ontrack training system. The training plans of Representatives have been developed having consideration for a number of factors. These factors include the areas of advice in which Representatives’ work, industry based competency standards relevant to the various areas of advice, and the licensee’s training requirements.
Representatives are required to complete a minimum of at least twenty hours of training in total. The total minimum time requirement for Freeman Fox Seminars is two hours. To successfully complete this mandatory requirement Representatives must attend the seminar. Representatives are permitted to substitute online CPD by attending CPD accredited seminars and workshops conducted by industry participants.
It is mandatory that Representatives attend a monthly moderated training session facilitated by the Compliance Manager to successfully complete this requirement. Franchisees are required to complete a further ten (10) hours online CPD top up to complete a minimum of at least thirty hours of total training.
The Compliance Manager will review progress towards meeting the requirements of training plans on a monthly basis. HODs will be responsible for ensuring all Representatives/ ARs remain up to date with their monthly training requirement. Training plans are reviewed in total by 30 June. At this time Representatives/ARs will be assessed on whether the objectives outlined in the plan have been met.
Role of Compliance Personnel
The Compliance Manager reports to the General Manager. The Compliance Manager has direct access to the Chief Executive Officer and the Board. The role is accountable for identifying the business’ obligations in law, standards, and codes and for developing a framework to efficiently manage all aspects of compliance risk.
The Compliance Manager:
- Reports monthly to the Financial Services Compliance Committee which is comprised of the General Manager (Chairman) and the Manager Stockbroking.
- Reports periodically to the Board on compliance matters: breach reporting; monitoring and supervision; complaints handling; and education and training.
- Administers the monitoring and supervision program for the financial planning and stockbroking divisions: reviews client files; conducts on-site reviews; and attends client appointments.
- Reviews disclosure documentation and marketing materials to ensure compliance with regulatory requirements: Financial Services Guide; Statements of Advice; Product Disclosure Statements.
- Maintains training records for all authorised representatives of the Freeman Fox group.
- Primary contact and liaison with the ASIC, ASX and AUSTRAC in relation to compliance matters.
The compliance program is reviewed by an external compliance consultant every 6 months. Dedicated compliance personnel including a full time Compliance Manager, external auditor, external compliance consultants, and external legal counsel.
The Board is responsible for ensuring FFL implements and maintains policies, procedures, systems and monitoring mechanisms to comply with financial services laws. Monitoring compliance is achieved via quarterly management reports and compliance statements from the Management team.
The compliance policies, procedures and systems are subject to review at the following times:
- Annually in conjunction with the business planning cycle;
- When a significant change in business strategy or direction is planned;
- When a significant change in the business environment occurs;
- The introduction of a new business line or service; and/or
- As new risks to the business emerge.
MONITORING & CONTROL
The FFL Monitoring and Supervision Program (“MSP”) has been introduced in order to place appropriate emphasis on conduct and disclosure provisions in the Corporations Act 2001 and AFSL conditions, and detecting breaches of the Market Participants Rule obligations. The MSP has been developed having regard to guidance provided in ASIC RG104, RG175, and the Rules. The MSP is conducted by the Compliance Manager with the support of an external compliance consultant. The MSP is the primary tool by which FFL monitors Representatives’ activity and detect potential breaches. The main objectives of the MSP can be summarised as follows:
To ensure that FFL compliance measures, processes, and procedures, as they apply to the trading function, and client files (and the information required to be contained in them):
- Are clear and convincing;
- Are understood by all employees;
- Promote a culture of compliance;
- Can be easily maintained and modified;
- Facilitate measurement of outcomes; and
- Can be effectively reported on for action as required.
Each month, a number of client files are randomly selected from each business unit (including Stockbroking),or inspection against the Client File Inspection Checklist (“File Checklist”). The File Checklist includes provisions for inspection of both paper based and electronic components of the client file. Checklist, compared and analysed for evidence of any possible emergence of recurring or systemic problems. The results will be consolidated for the analysis of trends (if any).
Monthly reporting to the Financial Services Compliance Committee (“FSCC”) will be based on only those files inspected in that particular month, although some reference to past inspections and reporting may be necessary for contextual purposes. Half yearly reporting will analyse the past six months of file inspections with a view to identifying any trends that may have been emerging prior to any remedial action having been undertaken. All reporting will include details of actions undertaken and/ or planned to remediate issues discovered or perceived to be a potential risk.
COMPLAINTS HANDLING POLICY
Freeman Fox Limited “FFL”otherwise the “Company”) shall maintain the following:
- A Complaints Register – Recording in detail all complaints received from customers;
- An Internal Complaints Resolution Procedure that complies with AS 4269-1995;
- Be a member of an External Dispute Resolution Scheme (“EDRS”), in particular Financial Ombudsman Service (“FOS”), which will provide mediation and arbitration services for complaints that cannot be handled by the Internal Complaints Resolution Procedures;
- Staff training in complaints resolutions; and
- The Financial Service Guide (“FSG”) is to inform customers of the complaints resolution procedures of FFL, and outlining their rights for action.
All staff must understand these procedures. Certain staff members will be tasked with the role of managing and dealing with complaints. These staff will require full training in handling complaints and be available to deal with such situations when and if they occur.
All complaints handling will maintain a positive attitude towards customers and a commitment to resolving complaints.
This is based on the premise that:
- Customers have the right to complain/comment and to have their dissatisfaction handled;
- Complainants provide feedback about a product or service experience;
- Complaints received gives an opportunity for the Company to maintain confidence as well as enhance the Company’s products and services;
- Complainants will be provided with information on the complaint handling process and avenues for further review e.g. FOS brochure; and
- The Company shall always endeavour to provide an efficient, fair and accessible mechanism for resolving customer complaints.
The Complaints Register is a detailed record of all complaints received by FFL from customers. The Complaints Register must be used to record every complaint received. Failure to do so may result in a minor complaint becoming a serious legal issue. The FFL Complaints Register is maintained in a Microsoft Excel Spreadsheet. The Compliance Manager will be responsible for handling information relating to complaints and will maintain this register.
A hard copy will be printed and stored within FFL premises for a period of not less than 7 years from the date of last correspondence in relation to the complaint.
The Complaints Register will record the following information:
- Date of complaint;
- Name of complaint resolution officer;
- Name of complainant;
- Detailed account of complaint;
- Action taken and resolution;
- Referred to higher authority; and
- Referred to FOS.
The Complaints Register will be monitored and reviewed monthly by at least one Director of FFL, and any outstanding, systemic, recurring or unusual situations will be highlighted to the Board of Directors.
The Complaints Register shall always be maintained and be readily available upon request of ASIC, ASX, FOS or any other governing body.
Internal Complaints Resolutions Procedures
The standard internal practice of FFL when processing either oral or written complaints are outlined below:
- Oral Complaints
Steps are as follow:
Identify yourself, listen, record details and determine what the complainant wants:
- Confirm the details received;
- Empathise with the complainant in a courteous manner;
- Explain the courses of action available;
- Do not attempt to lay blame or be defensive;
- Resolve the complaint if possible or commit to doing something immediately, irrespective of who will ultimately handle the complaint;
- Ensure that the member is informed the complaint is receiving attention, without creating false expectation;
- Check whether the member is satisfied with the proposed action and, if not advise alternative courses of action and forward booklet;
- Provide acknowledgment e.g. thank you letter, a telephone call; and
- Follow up as appropriate and monitor to ensure the member remains satisfied as well as receives feedback.
- Written Complaints
Refer to Oral Complaints procedures above, and promptly give a response in writing.
- Suggested Remedies
FFL shall have the following provisions of remedies, depending on the circumstances of the complaint:
- Technical assistance;
- Financial assistance;
- Other assistance;
- Apology; or
- Externally Managed Complaints Scheme
In keeping with ASIC and ASX requirements to all holders of an AFSL, FFL is a member of an EDRS.
FOS acts as the complaints resolution body of the financial services industry in Australia. FOS are able to deal with any complaints arising from any form of products, investments, advice, dealings or transactions involving members of the public and participants in the industry, or investments directly or indirectly of moneys belonging to members of the public by participants in the industry.
FOS provides external mediation and arbitration services for financial organisations and their customers when complaints cannot be resolved internally. FFL is a Category F member (non-voting).
- What conditions have to be met before using FOS?
Before FOS can deal with the matter, the complainant must have raised the complaint with FFL, and the matter has not been resolved to the satisfaction of the complainant. A period of 45 days must have elapsed since the complaint was given to FFL or 90 days if FFL promptly notifies the complainant that the company requires 90 days.
- Complainant Fees
These fees are set by the Board of Director of FOS and are payable when a complaint is received by the member organisation. All services are provided free of charge to members of the public.
The Compliance Manager will attend external training from time to time. A monthly meeting is carried out between the Compliance Manager and the Financial Services Compliance Committee (“FSCC”) to address all issues involved in handling complaints. However, FFL must advise the complainant that if they do not agree with the request for the extension of time (up to 90 days), then the issue may be referred to FOS to determine the matter. FFL must advise complainants that they may complain to FOS if they are unhappy with the outcome of the complaint.
Staff training in complaints resolution is of paramount importance to ensure that all complaints are handled in the most professional and efficient manner.
- Training Level
All staff must be familiar with the Internal Complaints Resolution Procedures.
All staff must understand which actions they are able to take in certain situations. More importantly, they must have a clear channel to transfer the complaint should they not know how to resolve it.
Both the Compliance Manager and Managers must be well trained, as they will be the first point of contact for most complaints.
All level of staff must be aware of their responsibilities and objectives when dealing with complaints. FFL shall endeavour to prepare and distribute complaint handling procedure guides to staff so as to promote quality management.
- Staff Training
The Compliance Manager will deliver staff training at least once every 3 months. The Compliance Manager will be trained under the following scopes:
- Regulations governing complaints;
- Manners on handling complaints;
Complaint Handling Procedures
- Compliance Manager must check the complaints delegated email everyday and handles all complaints received: firstname.lastname@example.org
- Compliance Manager must prepare monthly report to the FSCC based on the complaint emails, phone calls, faxes, letters or other mediums.
In the event that no complaints are received in the month, the Compliance Manager must prepare a monthly report to indicate that there no complaint was received during that period.
- The Compliance Manager must prepare monthly report on the last business/calendar day of the month.
- The Compliance Manager will report to the Corporate Risk and Compliance Committee (“CRCC”) on a quarterly basis.
The Chairman of the CRCC will report to the FFL Board on the report received from the Compliance Manager.
- In the event there is a complaint on a particular business day, the Complaint Manager must create a Complaint File Note Summary and report to the General Manager before the end of that business day.
- The General Manager shall keep the Chief Executive Officer informed until the issue is resolved.
- Register of Complaints must be kept up to date and be available for review at all times.
- The General Manager will conduct spot checks on the Compliance Manager’s complaints handling to ensure that the correct procedures have been followed at all times. The extent of the checking may encompass a review of the Compliance Manager emails, or other mediums available to audit the Compliance Manager’s work. This kind of spot check will be carried at least quarterly.
- In the absence of the Compliance Manager the General Manager will appoint another officer to undertake the role under their direct supervision.