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Deterring Others a Key Factor in ASIC Action

The likelihood of an enforcement outcome acting as a deterrent for others in the financial services sector is a key consideration for the Australian Securities and Investments Commission when determining whether to take action, the regulator has advised.

Speaking at the Macquarie University Financial Risk Day in Sydney last week, ASIC Commissioner, Greg Tanzer, provided some insight into the way ASIC prioritises its enforcement action.

“ASIC is not resourced to take action in relation to every instance of misconduct that is brought to our attention,” Mr Tanzer told attendees.

“We prioritise matters for investigation based on the extent of harm or loss, the benefits of pursing misconduct, and the available evidence. Or, to put it a little crudely, we want to make sure Australians get the biggest bang for their buck.”

Mr Tanzer said that 70% of ASIC’s regulatory resources are devoted to surveillance and enforcement. These activities are shaped by strategic risks, which are identified by the regulator each financial year.

Beyond these strategic risks, Mr Tanzer said an underlying consideration for any enforcement outcome was the deterrent impact of its actions.

ASIC is not resourced to take action in relation to every instance of misconduct that is brought to our attention

“Most importantly, we take enforcement action so that there are meaningful consequences – whether they are criminal, civil or administrative – for those who break the law,” he said.

“Over and over, cases show that some people will break the law if they think no one is looking. For example, Melinda Scott, a former financial adviser, was found to have defrauded more than 150 clients of over $5.9 million over a period of 20 years. However, her actions caught up with her – last month she was jailed for over six years.

“At ASIC, we look at how we can leverage our enforcement tools to achieve the greatest impact and address the largest areas of risk.”

Meanwhile, ASIC has fined an advice firm for a misleading article on its website.

Australian Financial Planning Solutions, based in Victoria, has paid $10,200 in penalties after ASIC issued the firm an infringement notice for making false or misleading representations. ASIC’s concerns related to an article titled ‘Benefits of a Self-Managed Super Fund’ that appeared on the firm’s website in the second half of 2014.

ASIC said it was concerned the article:

  • Contained misleading and unsubstantiated claims that major retail and industry superannuation funds will experience payout difficulties
  • Misrepresented the taxation implications of self-managed superannuation funds (SMSF) compared to major retail and industry superannuation funds, by giving the impression that certain tax benefits only apply to SMSFs, when they actually apply to most superannuation funds

Deputy Chairman, Peter Kell, said: “Consumers should be able to trust the information provided by financial firms when making decisions about their investments, including superannuation. ASIC will continue to take enforcement action where AFS licensees provide misleading information.”

The firm has subsequently removed the article from its website.