Nationals' Senator John Williams said that ASIC should be able...

Nationals' Senator John Williams said that ASIC should be able to "put a stop order on a financial planner or a liquidator when evidence of misconduct is presented, effective immediately." Williams first flagged the issues around ASIC's performance to the Senate in June 2013, when he introduced a motion for an inquiry into the regulator.





Wake-up call for watchdog after inquiry
Tuesday, 22 April 2014 11:55am
By Laura Millan | In Regulatory

The Economics Committee conducting the inquiry into the performance of the Australian Securities and Investments Commission (ASIC) will present the Senate with "a widespread report that will include the industries' black holes and dark corners."

The senator and chair of the Committee Mark Bishop told Financial Standard that the report will reflect "the strong impression that the Committee has as to the adequacy of ASIC as a regulator." It will also address its role, its structure and "the responsiveness of the regulator itself and its relationship with participants in the industry."

During recent months, the Committee has examined thousands of pages contained in 456 submissions. It has also conducted five public hearings and listened to dozens of witnesses, sometimes for more than 10 hours in a row. Senators will spend the coming weeks working on a report that is expected to be tabled in the Senate by mid-May or June.

While it is still early to draw conclusions on the report's content, senators agree that the proposed changes will be broad. "The inquiry will help shake up ASIC," Greens' senator Peter Whish-Wilson said.

Nationals' Senator John Williams said that ASIC should be able to "put a stop order on a financial planner or a liquidator when evidence of misconduct is presented, effective immediately." Williams first flagged the issues around ASIC's performance to the Senate in June 2013, when he introduced a motion for an inquiry into the regulator.

The motion was prompted by media reports that it had taken the regulator 16 months to act on cases of serious misconduct within Commonwealth Financial Planning, but the Commission soon made it clear that the inquiry would look at ASIC's broad performance.

Williams stressed the need for better whistleblower protection and added that the regulator should be able to address wrongdoings through commercial and criminal law. He also noted that "lots of submissions have complained that ASIC is thorough with small businesses, but that is slower with the bigger end of town."

On top of the specific recommendations that the report is likely to address, the inquiry has prompted a broader debate on the regulator's role. "There are two types of regulators: the proactive and the reactive," Minter Ellison partner Maged Girgis said, adding that "ASIC by definition is more reactive, while APRA is more proactive."

Girgis noted that ASIC "deals with hundreds of thousands of companies," but that its concern is governance and compliance, not the businesses themselves. "ASIC has to regulate everything from banking products and super disclosure to mining; it's being pulled in a lot of directions."

The Committee should be looking at ways to make ASIC more efficient and to eliminate duplications, he suggested. "Should we look at having one regulator with two different arms instead of two regulators that overlap on several issues? Maybe," Girgis said.

Senator Whish-Wilson explained that another key issue is looking at "who audits the regulator" and suggested that the Committee should be thinking about an independent organisation to which ASIC could report and that could deal with the regulator's conflicts of interest.

Whish-Wilson added that "what will actually help ASIC in the future is a change in the external financial services environment." The Senator stressed that new regulations such as the Future of Financial Advice (FoFA) reforms indicate that "there is a will within the industry to make things change."

Financial Planning Association (FPA) chief executive Mark Rantall proposed "a hybrid model where the profession itself deals with everything that has to do with professional standards so ASIC can focus on the systemic problems."

A key issue for the financial planning community and the regulator is "to get in front of advice failures, instead of going behind." According to Rantall, this can only be achieved if the regulator, the licensees and the profession work in unison

He defended the need to build strong professional standards that allow the regulator to focus on the industry's systemic problems. "Everybody looks at the regulation, but the real problem is a cultural one: people who put commercial interest on top of everything else," he said.

To Rantall, it all comes back to ensure that the industry works "with the intent of the law, and not just by the letter of the law. The only way to make this happen, he says, is by promoting professional education and high standards."