End ‘conveyor belt of consumer harm’ by unlicensed lead generators: Longo

Outgoing ASIC chair Joe Longo will call for the end of unlicenced communications about superannuation, including from lead generators.

In a speech to be delivered on Thursday morning to the Financial Counselling Australia conference, provided to Professional Planner, Longo will say there will always be business models that test the regulatory perimeter, and that enforcement is needed to protect consumers from harm.

“Most recently, we have witnessed unscrupulous actors trying to exploit the significant pot of money in our superannuation system through what we suspect is industrial-scale misconduct,” Longo will say, referring to the $1 billion Shield and First Guardian collapse.

“Everyday Australians who signed up for a free super check have instead lost their life savings. We must disrupt the lead generation model that has enabled this conveyer belt of consumer harm to occur.”

ASIC has already published a list of known lead generators and the licensees that have used them, although inclusion on the list isn’t an accusation of wrongdoing, only a warning to consumers.

The government has also launched an industry consultation on the practice, aiming to add stricter requirements to the operators of lead generation services, strengthening the rules on unsolicited selling, addressing conflicted payment structures and disrupting harmful or misleading advertising.

AFCA determinations have found that lead generators were doing the tasks of a financial adviser and even receiving a cut of the advice fee.

The issue came to the fore in the aftermath of the Shield and First Guardian collapse which ASIC described as an “industrial scale” pipeline of lead generators using high-pressure sales tactics to roll Australians into high-risk products.

“We wouldn’t let someone perform heart surgery just because they’ve watched a lot of ER – therefore we shouldn’t let people who aren’t qualified lure Australians into losing their life savings and turn a profit from it,” Longo will tell the conference.

“In my view the most effective way to address this misconduct is to stop it at the source – and a ban on unlicenced communications would certainly go a long way to achieving that.”

The speech will be one of, if not the final, given by Longo in a public forum.

Longo announced last year he would not seek re-appointment at the end of his five-year term, with deputy chair Sarah Court to take over from the start of next month.

Reflecting on his tenure, Longo will tell the conference it was no secret the regulator he stepped into had its challenges in the aftermath of the Hayne royal commission.

“Confidence had rightly been shaken in ASIC as a regulator, we faced criticism that we were a watchdog with no teeth,” Longo will say.

Longo will tell the conference one of the most significant decisions he and the deputy chair made was to introduce the practice of annually announcing its enforcement priorities.

The outgoing chair says Court’s address to the regulator’s annual forum has become highly anticipated in the market as it provides clarity for where ASIC will expend its resources, offers a deterrent for misconduct and requires the regulator to be accountable for what it said it would do.

“In certain quarters, it has been suggested that ASIC should be quieter about its work or do deals behind closed doors,” Longo will say.

“However, I never want the public to lose confidence in ASIC again in the same way it did after the royal commission and maintaining confidence means telling people what you’re going to do and following through on it.”

Longo said leading the regulator ultimately means making choices over whether to pursue an investigation or litigation.

“The thing about choice is that every time you say ‘yes’ to something, you are effectively saying ‘no’ to something else,” Longo will say.

“ASIC does not have unlimited resources, and the reality is that there are a limited number of cases we can bring each year. That is why being transparent about the choices we make, and why we make them, is so important.”