The culture of financial services businesses and the incentive structures they use are a continuing concern for the Australian Securities and Investments Commission.
ASIC has highlighted the areas where it will focus its regulatory action over the coming 12 months, pointing to conflicted distribution models, and poor compliance systems within advice businesses as key concerns.
The regulator has warned that it will continue its surveillance of financial advice firms to ensure they have policies, processes and procedures in place to comply with their legal obligations. The six largest financial advice institutions will be targeted for surveillance, and ASIC will also continue to review breach reporting for inappropriate conduct.
Poor retail product design and disclosure, and misleading marketing and advertising are also a focus for the regulator. Specifically, ASIC said it would continue to target add-on insurance (such as consumer credit insurance) and the provision of advice about self-managed superannuation funds by unlicensed advisers.
The information was released by ASIC as part of a new initiative to improve communication with the public about its enforcement work. The ‘Strategic Outlook’ report sets out the key risks ASIC sees to the markets it regulates, and how it will prioritise its tools of surveillance and enforcement to address these risks.
Among the other risks identified by ASIC are globalisation, innovation-driven complexity, and the different expectations and uncertainty the public may have about what ASIC can achieve.
…we will take action against entities, regardless of their size or reputation
ASIC Chairman, Greg Medcraft, said: “Being transparent about our role and priorities, the risks we see and how we will respond helps our stakeholders better understand what we achieve and why.
“Importantly, where we see non-compliance, we will act quickly and decisively through our ‘detect, understand and respond’ approach.”
Mr Medcraft said ASIC used around 70% of its regulatory resources on surveillance and enforcement.
“ASIC is a law enforcement agency and we will take action against entities, regardless of their size or reputation.
“At the same time, those we regulate must act in the long-term interests of investors and financial consumers to ensure that trust and confidence in the Australian financial system remains strong.”
Next financial year, ASIC will build on the ‘Strategic Outlook’ initiative and publish a detailed ‘Risk Outlook and Strategic Plan’.
Click here to view a copy of the Outlook.
I am a planner in the game for the last 3 1/2 years, and I consider my self very naive after reading this news, therefore would be very interested any anybody else’s comments, specifically on ASIC’s crackdown on unlicensed advisers providing SMSF advice.
Does this actually go on? Does anybody know of any occasion recently where shysters like this operate? Am I that naive??
Certainly goes on – real estate salespersons sprout buying property through SMSF and often have relationships with mortgage brokers to arrange the finance, accountants without an AFSL often tell their clients to set up SMSF and borrow to buy property. All without any advice documentation. At least one super fund administration service I know of even prepares Investment Strategies (that certainly don’t comply with the requirements suggested on the ATO site.)
Why dont ASIC take 70% of its regulatory resources on surveillance and enforcement and direct that to other businesses….. For example Stockbrokers! Flogging penny-dreadfuls to clients based on nil advice, all the while the broking companies are in the back ground either feeding stock (and BS) to retail mums and Dads for the benefit of either themselves, their own firm or “sophisticated Investors”. Not to mention manipulation of the share price (up or down) to suit their own agendas… The ones on the receiving end are the poor mums and dads who have been sold the world but at the end of the day end up with a creek…. one they are stuck up.
ASIC have an obsession with fin advisers themselves and it seems like every regulatory body sides with consumers who are happy to point the finger when it all hits the fan.
why don’t the regulators restrict upfront commissions to customers that do not already have a policy. Simple and solves many problems…
Unfortunately ASIC is in my opinion correct most “financial advisers” are really just sales people who provide no advise, I think there should be a clear distinction between financial advisers and sales people this would help the investing public identify advisers vs sales people.
Another MAJOR issue IMO is the way the Bank and Fund managers hide behind names that give the impression they are independent for example Financial Wisdom which should advertise with honesty and just be named Commonwealth Bank Sales
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