Mr Medcraft fronted up to a Senate Economics References Committee public hearing in Sydney yesterday as part of the committee’s inquiry into the performance of ASIC.
Nationals Senator John Williams asked the panel of ASIC commissioners what needs to be changed – either in regulation or legislation – to allow the regulator to make a phone call and suspend a planner “on the spot”.
The question came about in the context of ASIC’s failure to ban former Commonwealth Financial Planning adviser Ricky Gillespie until November 2012 – despite receiving documents about Gillespie from CBA years earlier.
ASIC senior executive leader Greg Kirk laid out the formal legal processes that are required before an official banning order can be handed down.
“Under the current legal settings, we’ve got to establish proof, have a hearing and give them a right to to be heard,” said Mr Kirk.
To allow immediate suspensions would involve ASIC in being given powers that “over-rode people’s rights to hear the case against them and have it tested before there was a legal outcome that took away their right to earn a living”, he added.
But Mr Medcraft was open to the idea of “reversing the onus” onto the financial planner by immediately suspending them as a “protection mechanism” in cases where there is damage being done to individuals.
“You would then have a process where in fact they have to defend why that suspension shouldn’t become a permanent banning,” he said.
Similar powers already exist in law in the form of ‘stop orders’, Mr Medcraft said.
“We issue stop orders on prospectuses, [for example] … The principle is already in the law in relation to other aspects in Corporations Law,” he said.
“I don’t think it’s unreasonable that there be that ability to suspend where there was evidence there that it was so egregious.
“Especially if the company itself had suspended the [planner] – at least you stop the planner from actually going and getting a job with another firm. I think it’s a good idea,” Mr Medcraft said.
I didn’t realise the KGB had set up shop in Australia. Why are financial advisers rights to due process being abused. Our ELECTED REPRESENTATIVES are throwing away individual rights at the stroke of a pen. All financial advice professionals should be vocally upset at this. Sorry all Financial Advisers should be screaming.
When will the onus be on ASIC representatives for failing to act promptly to protect consumers? When will ASIC be put in a position that it’s failure to act will result in suspensions, financial penalties and criminal prosecution…
I think its a good idea as well!! Advisers have the opportunity to exonerate themselves.
Sounds like a good idea but what compensation arrangements will be in place for the planner and his/her clients where ASIC has been found to have insufficient cause to ban the adviser permanently? Does the suspension invalidate PI cover and if so what protection is available for the licensee and clients if advice needs to be given during a period of suspension? Sure, the licensee can be held responsible during the suspension period but what if the planner is self licensed? This needs careful thought and Mr Medcraft would be better advised to hold back his opinions until he thinks about the consequences of every “good idea” that comes along.
Wow that’s really scary. Lets take away all the rights of the financial advisor by a government department that doesn’t always get it right. The financial advisor remains the convenient scapegoat for ASIC so that fund managers and auditors and all the level of responsibility for managing client monies don’t need to take any responsibility. $37billion of failed and frozen funds and only the advisor is responsible. Really!