Be aware, this watchdog bites

The Australian Securities and Investments Commission is all about empowering people to be confident and informed when investing. We do this by addressing both the supply and demand of the investment process. This involves our enforcement and educative work, which complement each other. On the demand side, we want to educate investors. That is, give them the rudiments to help them think carefully before deciding where, or where not, to put their hard-earned money.

The Australian Securities and Investments Commission is all about empowering people to be confident and informed when investing. We do this by addressing both the supply and demand of the investment process. This involves our enforcement and educative work, which complement each other. On the demand side, we want to educate investors. That is, give them the rudiments to help them think carefully before deciding where, or where not, to put their hard-earned money.

Figures from ASIC's MoneySmart website show consumers are keen to educate themselves about financial matters. Here are some numbers:

4.5 million-plus unique visitors to MoneySmart since its launch in 2011

Close to 100,000 views of MoneySmart's 200-plus videos, covering such things as debentures, complex products, budgeting, super and prospectuses

5000 teachers have used MoneySmart's professional learning program. This is designed to educate them so they can help schoolchildren learn about money

285,000 downloads of MoneySmart's apps including a mobile calculator and an app that tracks spending on the go; and

14,000+ Facebook likes and more than 2,500 Twitter followers.

Of 200 investor protection sites ranked by the International Organisation of Securities Commissions, MoneySmart was one of only 10 rated as "outstanding" and given a five out of five score.

Financial literacy is one of the cornerstones of what ASIC does and should not be underestimated, either in the way it is delivered or its impact. On the supply side, since becoming ASIC chairman I have talked about going beyond disclosure and holding those we see as gatekeepers to account.

Gatekeepers are those in the value chain that provide investors with the information they need to navigate the financial world - for instance, such people as directors, auditors, advisers and research houses. These groups must be aware of their responsibilities and act appropriately.

ASIC's enforcement record on holding gatekeepers to account is solid. After the collapse of Trio Capital, our investigation has led to 11 people being jailed, banned, disqualified or removed from the industry for more than 50 years.

Earlier this year we accepted an enforceable undertaking from Macquarie Equities following a surveillance that found deficiencies in its supervision of advisers. Macquarie must rectify the problems and create a culture where compliance is central to advice, not an afterthought.

Furthermore, ASIC has the audit sector on notice following poor results from last year's audit firm inspection.

And earlier this year, a so-called "mastermind" behind a dozen unregistered offshore managed investment funds was permanently banned and fined $500,000 - the largest fine in ASIC's history. What is more, three advisers linked with this scheme are now in jail.

ASIC is also targeting the less scrupulous advisers in the self-managed super fund sector and has set up a taskforce to weed out dodgy advisers and spruikers.

Where we see the disclosure regime has been pushed to the limit, ASIC has acted. For example, we have proposed reforms to strengthen regulation of debentures and ramped up the capital requirements for mortgage funds.

We are also putting the heat back on product manufacturers and asking them to consider e-learning modules that might help educate investors, or, at least, better explain a product's risks.

Such an idea could overcome the inherent weaknesses in traditional disclosure - that is, people are rarely able or willing to digest a long and lawyerly disclosure document. Which is why we need to better harness social media to reach people and ideally shape their behaviour.

But the industry has its role to play, particularly around complex products. My position on this is clear - those selling complex products to unsuspecting investors need to wise up and do the right thing. They might get away with it for a while, but as we have seen overseas, governments and courts will inevitably rule in favour of investors.

ASIC is actively working for investors and consumers, arming them with the knowledge and confidence they need to choose investments that are in their best interests.

When investments go sour and money is lost, it is an enormously difficult time for individuals and their families. However, when this happens there is often a perception in the broader community and media that it is up to ASIC to prevent such failure and act as guarantor.

This is not the case. It is not ASIC's job to sign off on business models or give a green light to investments. What we can do is try to educate investors to ensure they are confident and informed. And what we can do is leverage our resources to engage with our regulated populations and monitor their conduct and disclosure and, when they fall short, take action.

Related Articles