Despite having increased its powers as part of the Future of Financial Advice (FoFA) reforms, the Australian Securities and Investments Commission is calling on the Government to grant it further controls to weed out ‘bad apples’.
In its submission to the Senate Economics References Committee inquiry into the performance of the corporate regulator, ASIC has provided a number of policy suggestions which it says will help it to achieve better market outcomes. Among the policy improvements proposed by ASIC are tools to help remove ‘bad apples’ from the industry, including the mandating of reference checks and an extension of ASIC’s current financial services registers.
According to ASIC, while the FoFA reforms have been an important step in transforming the financial advice sector from a sales-driven culture to a professional services industry, there still exist some regulatory gaps.
ASIC’s policy suggestions cover:
- Raising financial adviser competence through a national exam
- Helping remove ‘bad apple’ advisers and managers from the industry
- Enhancing whistleblower protections
- Strengthening ASIC’s licensing powers
- Streamlining search warrant powers
- Reviewing the level, consistency and availability of penalties
In particular, ASIC has called on the Government to mandate prescriptive reference checking within the financial advice market, to prevent ‘bad apple’ advisers from moving freely from licensee to licensee. The regulator said the financial advice industry suffered a ‘real and significant problem’ as a result of ‘bad apples’, because there was no consistent approach to reference checking or maintaining accurate and comprehensive employment records.
Under a mandated reference model, ASIC says ‘bad apples’ would be identified earlier and more quickly removed from the financial services industry because it could better target its surveillances towards higher risk advisers.
ASIC also wants the Government to:
- Provide it with the legislative power to extend its current financial services registers to include all individuals authorised to give personal advice on Tier 1 products, not just AFS licensees and authorised representatives.
- Strengthen its licensing powers, so that, when determining whether to issue a license, it can take into account a license applicant’s past conduct. This would include any previous involvement in financial services businesses where misconduct has occurred.
- Conduct a broad review of penalties across the corporations legislation, which could consider the consistency of criminal and civil penalties handed down, and the use of infringement notices for a broader range of breaches.
The due date for submissions to the inquiry has now passed, with the Committee expected to release its report in March 2014.
For more on the inquiry, see:
- AFA to Regulators – Treat Us All Fairly
- ASIC Admits to Lack of Communication on CFP Matter
- ASIC ‘Incompetence’ Leads to Senate Inquiry
