Paul Giamatti as US Attorney Chuck Rhoades in the Showtime series, Billions

There’s an episode of Billions, the brilliant Showtime series, in which US Attorney Chuck Rhoades (played by Paul Giamatti) outlines why embedding federal agents doesn’t work in uncovering  and prosecuting white-collar crimes within financial institutions. They end up getting too close to the people they’re supposed to be policing, to the point where the embedded  agents even end up trying to win  the approval of their supposed  targets, Giamatti says.

Such is the nature of human beings in an environment where power and money reign supreme. This scene from Billions came to mind when I was reading through Commissioner Kenneth Hayne’s quite pointed comments regarding the regulators in his interim report.

The interim report is the topic of this month’s Professional Planner cover story and has formed the basis of many hours of our team’s reporting since it landed at the end of September. In recent weeks the submissions coming in from industry have made for interesting reading.

In all my reading of Hayne’s comments, his views on the  regulator were the most emphatic; Hayne didn’t try to hide his opinion that ASIC may not be fit for purpose given the close relationship it’s built with the industry it’s supposed to  be holding to account.

“Too often, I suspect, ASIC has sought to accommodate the expressed wishes of the entity rather than determine what ASIC wants from the negotiation, tell the  entity what it wants and insist  upon it being provided promptly,” Hayne commented.

So listening to ASIC chairman James Shipton explaining to a Parliamentary Oversight Committee in October that the regulator’s inspectors would now be embedded at the big banks and AMP, I couldn’t help recalling Giamatti’s monologue about how embedding agents can  be problematic.

To me, Hayne’s comments on the regulator – he’s devoted a whole section to it, starting on page 267, volume 1 of the interim report – quite clearly indicate that not only the purpose and mission of the regulator but also the existence of ASIC itself is up in the air.

“As the Commission’s work has continued, there are signs that ASIC may be seeking to alter its approach to enforcement. Even so, I remain to be persuaded that it can and will make the necessary changes,” Hayne states in the report.

Removing ASIC from the industry would require a huge restructure and a monumental rethink about everything from the existence and role of licensees right down to how advisers give advice. I’m not saying it’s going to happen necessarily, but it’s clearly an option firmly on the table in Hayne’s mind, as are many other considerations that could lead to equally fundamental changes in the financial services industry.

We live in interesting times.


Smith is head of content and managing editor of Professional Planner and Investment Magazine.
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