AFS licensees must monitor adviser compliance through structured supervision and compliance systems, and ASIC expects this to include risk-based file reviews, ongoing monitoring, and escalation processes. Monitoring must be proactive, documented, and capable of identifying breaches, poor advice, and systemic issues.
Expanded Answer
AFS licensees are responsible for ensuring their authorised representatives comply with legal and regulatory obligations, and ASIC expects active monitoring as part of an effective compliance framework. Monitoring adviser compliance is not limited to periodic checks; it requires continuous oversight designed to detect, assess, and respond to risks in advice quality and conduct.
In practice, monitoring includes risk-based file reviews, where advice files are assessed for compliance with best interests obligations, disclosure requirements, and internal policies. It also involves broader surveillance activities such as reviewing client complaints, breach data, adviser behaviour trends, and key risk indicators. Higher-risk advisers or advice types are typically subject to more frequent and intensive monitoring.
Regulatory scrutiny increases where monitoring is inconsistent, overly reliant on checklists, or fails to identify recurring issues. ASIC expects licensees to demonstrate that monitoring leads to action, including escalation, remediation, and reporting of reportable situations where required. For further context, see what does a defensible compliance framework look like for AFSL and credit licensees and from samples to signals: a smarter approach to AFSL surveillance.
Why it matters
Ineffective monitoring increases the risk of undetected breaches, poor advice, and systemic failures. ASIC enforcement actions often target failures in supervision and oversight, underscoring the critical role of monitoring in reducing regulatory exposure.
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Practical guidance
- Implement a risk-based monitoring program that targets higher-risk advisers and advice types.
- Review advice files, complaints, and breach data to identify patterns and systemic issues.
- Escalate findings promptly and link monitoring outcomes to remediation and breach reporting processes.
Further reading
A practical guide to high-level file reviews for licensees and advisers
Preparing for a compliance review: key considerations