Watchdog wants more teeth to fight corporate misconduct
The proposals are part of the Australian Securities and Investment Commission's 200-page submission to a Senate inquiry into its performance.
They include calls for greater whistleblower protections and a national exam for financial advisers that would prevent "bad apples" from working in the industry.
The submission marks a philosophical shift for the regulator, calling into question its role in governing markets and calling for policy changes to allow greater intervention into suspected misbehaviour.
"These proposals would improve ASIC's ability to deliver on our legislative responsibilities and increase our effectiveness," it said.
The inquiry into ASIC follows scathing criticism of the regulator following Fairfax Media revelations of serious misconduct and a cover-up by Commonwealth Bank's financial planning arm and the failure of ASIC to act promptly.
While ASIC defended its role in the CBA affair, it recommended a number of policy changes, including enhanced search warrant powers.
"ASIC's investigative tool kit is lacking in relation to its search warrant powers, leading to inefficiencies and delays, and is not adequate to meet the complexity of modern corporate and financial investigations," it said.
"A simple but effective change would be to expand the search warrant powers in the ASIC Act."
It also called for harsher penalties for corporate crimes and questioned the "conduct and disclosure" approach that defined its role as watchdog.
"Internationally, regulators are looking for a broader tool kit to address market problems, moving beyond traditional conduct and disclosure regulation to design regulatory interventions that address the types of problems investors and financial consumers often experience in financial markets."
The conduct and disclosure approach is guided by the theory that markets need minimum regulation to work efficiently.
The CBA financial planning scandal resulted in the banning of seven planners who controlled hundreds of millions of dollars of client money. ASIC extracted a two-year enforceable undertaking in October 2011 despite being tipped off in late 2008 by a group of CBA insiders who wrote to ASIC warning it what was going on.
In its submission, ASIC called for an extension of whistleblower protection to include contraventions of criminal legislation.
Frequently Asked Questions about this Article…
The corporate regulator, ASIC, is proposing more investigative powers and tougher penalties for white-collar criminals. This includes enhanced search warrant powers and greater whistleblower protections.
The corporate regulator, ASIC, is seeking more investigative powers to effectively tackle corporate misconduct and enhance its ability to intervene in suspected misbehavior. This is part of a broader effort to improve its effectiveness in governing markets.
ASIC believes that its current search warrant powers are inadequate for the complexity of modern corporate and financial investigations, leading to inefficiencies and delays. Expanding these powers would improve their effectiveness.
ASIC is proposing several changes, including tougher penalties for white-collar crimes, greater whistleblower protections, and a national exam for financial advisers. These changes aim to prevent misconduct and improve the overall integrity of the financial industry.
ASIC is calling for a national exam for financial advisers. This would help prevent individuals with a history of misconduct from working in the industry, ensuring higher standards and protecting investors.
ASIC plans to address inefficiencies by expanding its search warrant powers. This change is intended to streamline investigations and better handle the complexities of modern corporate and financial investigations.
Whistleblower protection is a key part of ASIC's proposals. They are calling for extended protections to encourage more individuals to report misconduct without fear of retaliation, which is crucial for uncovering corporate wrongdoing.
The national exam for financial advisers is designed to prevent 'bad apples' from working in the industry. It aims to ensure that only qualified and ethical individuals provide financial advice, thereby protecting investors and maintaining trust in the financial sector.
ASIC's reassessment was prompted by criticism following revelations of serious misconduct and a cover-up by Commonwealth Bank's financial planning arm, as well as ASIC's delayed response to these issues.
ASIC believes that harsher penalties for corporate crimes will act as a stronger deterrent against misconduct. This is part of their strategy to enhance accountability and protect investors from fraudulent activities.
ASIC's proposed shift involves questioning its traditional 'conduct and disclosure' approach and advocating for more proactive regulatory interventions to address market problems, aiming to better protect investors and financial consumers.
Whistleblower protection is a key component of ASIC's proposals. By extending protections, ASIC aims to encourage more individuals to report misconduct without fear of retaliation, thereby uncovering and addressing issues more effectively.
Internationally, regulators are moving beyond traditional conduct and disclosure regulation. They are designing broader regulatory interventions to address common problems faced by investors and financial consumers in financial markets.
The CBA financial planning scandal highlighted gaps in ASIC's regulatory approach, prompting a reassessment of its powers and responsibilities. The scandal underscored the need for stronger intervention capabilities and more robust regulatory tools.
The CBA financial planning scandal resulted in the banning of seven planners who controlled significant client funds. Despite being warned in 2008, ASIC only extracted a two-year enforceable undertaking in 2011, highlighting the need for more effective regulatory tools.
The 'conduct and disclosure' approach is based on the idea that markets require minimal regulation to function efficiently. However, ASIC is questioning this approach, suggesting that a broader regulatory toolkit is needed to address the complex problems investors face in financial markets.
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