The Australian Securities and Investments Commission is inadequately resourced to fulfill its responsibilities, which has made it an ineffective, reactionary regulator, according to the Financial Planning Association.
In its 53-page submission to the Senate Economics References Committee Inquiry into the performance of the corporate watchdog, the FPA said the regulator needed to do more work in the area of consumer protection. It must also co-regulate in close collaboration with professional bodies.
“ASIC over-reaches in some areas, and under-reaches in others, leaving consumers of financial products and services unprotected in some instances and exposing them to unnecessary high risks,” the FPA submission stated.
The FPA is also petitioning to have ASIC’s powers curbed in the area of enforcement to ensure its finite resources are appropriately deployed and not consumed investigating big cases.
FPA chief executive Mark Rantall requested face-time with the Senate Inquiry to discuss ways that the FPA could work closer with ASIC to share the regulatory burden.
“We would welcome the opportunity to discuss these issues further and formally register our interest in appearing before the Committee,” he said.
The FPA described ASIC’s work with professional bodies as “based on limited ad hoc issues” and argued for the government to dictate ASIC’s focus via a memorandum of understanding.
The submission included research by the FPA which showed that since 2009 less than 5 per cent of ASIC’s total enforcement action, and on average less than 10 per cent of financial advice specific action, involved members of the FPA.
Over 90 per cent of financial adviser-related activity was against providers who were not members of the FPA.
The FPA said this demonstrated the vital role professional bodies played in “norming” good professional behaviour beyond legal minimum standards and the necessity of such obligations for the protection of consumers.
“Industry specific obligations set and enforced by professional bodies greatly complement the requirements of Corporations Law regulated by ASIC. Corporations Law requirements are over-arching and do not speak to the specific roles, services, and interactions provided to consumers by the various industries within the Australian financial services sector. Professional obligations are industry specific and are a vital part of the regulatory design,” the FPA submission said.
“True co-regulation, enabled by supporting legislation requiring membership of a regulator recognised professional body, and based on a collaborative two-way partnership between the regulator and professional bodies, is a cost-effective way to enhance consumer protection.”
