Bransgroves Lawyers has obtained senior counsel’s advice to the effect that the shadow discipline system utilised by the aggregators is potentially a criminally illegal cartel.
If a broker wishes to change aggregators the broker requires a letter from its existing aggregator that includes the expression no adverse conduct. This is referred to in the industry as a clean separation letter.
It was submitted by our client in Westpac Banking Corporation Ltd trading as St George Bank  FCA 1354:
It is standard in the industry for a broker leaving an aggregator to be given a separation letter that will state that the broker has “no adverse conduct” in circumstances where the broker has complied with their agreement and presumably has not been guilty of relevant misconduct. Without words in a separation letter indicating that the broker has “no adverse conduct”, the broker will effectively be unable to transfer lender accreditations to new aggregators, with the consequence that this effectively prevents the broker from working in the industry.
In cross-examination before the Royal Commission an Aussie Home Loans witness testified:
There is an arrangement with the lenders so that if we do not say “no adverse circumstances”, then they will understand that there is a reason why the person has been terminated.
In a letter to the ACCC the MFAA stated:
A broker may have difficulty finding acceptance by another aggregator without a satisfactory ‘no adverse circumstances clearance’ which is a standard industry requirement.
In practice the effect of a refusal to provide a “no adverse conduct” separation letter is that the broker is excluded from the industry for life.
We sought instructions from Marcus Young SC of University Chambers. Click here to see our letter of instructions.
We received Marcus Young’s advice. Click here to see the letter of advice.