ifa reported yesterday that a number of sources involved in the collapse of licensee Protect Ensure have come forward to accuse ASIC of unfairly banning financial advisers to hit targets.
In response, an ASIC spokesman told ifa the regulator does not have any KPIs that affect its decision on when to take banning action.
ASIC must first consider a number of factors set out in Regulatory Guidance 98 Licensing: Administrative action against financial services providers, the spokesperson said.
These factors include: whether ASIC has jurisdiction in the matter, the strategic significance of taking action, the benefits of pursuing misconduct, issues specific to the case and alternatives to formal investigation.
“ASIC will move to ban an adviser if considered necessary,” the spokesman said.
“Decisions in relation to taking banning actions are not subject to performance measurement-related considerations.”
In response to allegations that the banning process leaves advisers without a fair opportunity to defend themselves, ASIC said that the Corporations Act sets out the relevant procedural requirements for a banning order to be issued.
“The mandatory procedures require ASIC to give a person an opportunity to appear, or be represented, at a hearing that takes place in private, and to make submissions to ASIC before a banning order is made, except in limited circumstances (e.g. when the person ASIC is banning has already been convicted of serious fraud),” the spokesman said.
“The hearing is conducted by a hearing delegate who is independent from the operational team that carried out the review and investigation of the relevant banning matter.
“These procedures ensure an individual is given a fair opportunity to defend his or her case.”
As for whether ASIC believes there are better alternatives than just blanket bannings to deter bad financial adviser from the industry, the spokesman said the federal government and the advice industry are actively progressing measures to professionalise the industry.
However, the spokesman added that it is still important that ASIC, as a regulator, is able to take action against financial advisers who refuse to or are incapable of complying with the standards and regulations of the advice industry.
“ASIC’s experience is that an individual financial adviser can cause significant harm to a considerable number of vulnerable consumers,” the spokesman said.
“In such cases, it is imperative that ASIC can take actions to stop the financial adviser from causing further harm to consumers.”
This story is part of a widespread investigative feature on ASIC enforcement activity to be published in the March edition of ifa magazine.
Brings into question whether ASIC should be judge, jury and executioner.
Maybe its time to review the system in how these banning orders are applied. The whole premise of a democratic system is that “procedural fairness” is of the utmost importance and if the threat is perceived or real then maybe it should be changed…lets face it the whole financial services law is based on the premise that a few act the wrong way.
NOTHING TO SEE HERE! If ASIC say it’s all good then it must be all good – believe us or we’ll ban you! WORD OF CAUTION FOR ASIC – there will be a conga line of advisors ready to litigate WHEN your true colours are revealed 🙂 !
Funny you mention that. Remember most PI cover has a Cost of Inquiry funding. It could mean each adviser has E$250K of Legal funding for the Hearing (it’s a trap!) or Submission, but often you can’t choose your Lawyer.
Well that statement doesn’t give me any confidence at all. What on earth are they referring to when they talk about the ‘strategic significance of taking action’ or ‘the benefits of pursuing misconduct’. If an adviser is to be banned, it should be based on the facts related to the case and it should be very clear that the protection of the public is the priority. If that is not the case, we have a very, very serious problem.
Royal Commission into ASIC
Why does ASIC with the whole weight of the Australian Government budget behind then commit financial warfare on those advisers that say they are hard done by?
If they were confident in their stance surely the AAT would agree with their position so they have noting to be scared of by those taking those actions. In the Protect Ensure case they basically bankrupted a young adviser who did not have the means to defend her reputation.
I’ve heard ex ASIC staff boasting about “hunting down” adviser targets to “get their numbers up”, like it was a competition. It’s disgusting. The problem is we don’t have a cohesive association to self-police and until we do so this kind of behaviour will continue.
Not sure if this is true, reported the actions of an Adviser who was 100% criminal in his actions towards a client, lying about research, commissions and even that he was the real developer on a property deal, client lost 96% of funds when it went south and ASIC said, “we are too busy to investigate and its the first time the Adviser had been reported so not action to be taken” – His AFSL has gone broke, the development went broker and the clients money is all gone, yet ASIC wouldn’t investigate the claims, so not sure how true this claim of KPIs really is.
Oh, this is easy then. If they claim that it isn’t being done, let’s have the entire senior management team publicly sign a document stating that they’ll resign immediately with no future pensions or benefits. If it’s not being done, no problem right?
Someone who works at ASIC has told me that there are certain times of the year when employees are pressured to increase the number of convictions, in order to meet targets.
How ironic that ASIC enforces the relevant sections of the Corporations Act in relation to conflicts of interest and remuneration (as they should), yet the ASIC staff have their own conflicts which influence behaviour and are not disclosed
There is always a spike of banning or other orders in the weeks leading up to Christmas every year.