Speaking at the Centre for International Finance and Regulation conference in Sydney last week, Mr Kell said ASIC’s approach over the past 15 years has been “anything goes as long as you disclose”.
“The role of disclosure is an underlying principle in structuring your regulatory requirements and regimes,” Mr Kell said.
“That was central to the Wallis Inquiry regulatory philosophy and is central to ASIC’s powers,” he said.
“The approach we have had over the last 15 years has been ‘anything goes as long as you disclose’, that you can issue any sort of product out there – which has certainly enabled a wide range of choice – as long as you disclose, and you can have any sort of remuneration structure with conflicts of interest imbedded in it, as long as you disclose.”
While he admits this is “not a nuanced version” of ASIC’s duties, Mr Kell said it does “capture our approach.”
“One of the lessons we have had since then is that approach puts too much weight on disclosure to address market problems,” he said.
“We have had a situation where too often disclosure has been the answer but we have forgotten the question.”
Disclosure remains central to the regulatory philosophy that underpins ASIC’s powers, Mr Kell said; however, the regulator is increasingly looking at areas where disclosure does not address market issues, he added
“We are looking into areas where disclosure is not addressing the market failure, not improving market outcomes, but all it is doing is imposing costs on those that have to produce the disclosure documents,” he said.
Nice theory Gav, but as you have noted impractical and unworkable. Do doctors say you have an infection and then refer off to someone else to prescribe?
Does the General Insurance Broker say you need PI and Workcover and then send you somewhere else to get it?
No, conflicts definitely need to be minimised and managed, but the answer? Not sure.
Perhaps financial advisers should only make recommendations as to strategy and leave the product sales to in-house salesmen, or would that make financial planners into accountants who don’t do tax? Who would be responsible for checking the salesman followed the strategy appropriately? How many salesmen should be consulted and at what cost because to avoid undisclosed conflicts someone who had access to all options would have a vested interest somewhere? Maybe the system isn’t perfect as it is but people are generally getting great advise and their dreams are being realised by an industry that generally acts in the clients best interests. After all, if they do not another adviser will ‘fix’ the problem and move the client to something that is in the clients interests. (unless it’s a churn situation – but that’s another story).
I just find this stuff incredible!
Just think, if financial planners were genuine fiduciaries (and most like to think they are), then mere disclosure of a conflict would be a wholly inadequate method of managing the conflict.
The fish rots from the head. If the regulator won’t enforce fiduciary responsibility, what hope do they have of fuflilling their charter of consumer protection?