In a submission to the Senate Economics References Committee inquiry into penalties for white-collar crime – which has now lapsed due the July 2 election – ASIC said the fines here are low by international standards and therefore unlikely to deter misconduct at large firms.
For example, those caught engaging in unlicensed activity in Australia could face a penalty of $36,000; the same offence might attract a $5.2 million penalty in Canada or a $5.6 million fine in the US.
A civil and administrative penalty related to inappropriate advice could reach $200,000 in Australia. In Hong Kong, that penalty would sit at around $1.4 million.
The US administrative penalty for providing inappropriate advice is $83,850. The UK, however, has no limitations on the fine, according to ASIC’s submission.
Further, Australia’s regulator has no powers of disgorgement – or the ability to remove the financial benefit derived from wrongdoing – when it comes to non-criminal proceedings.
Canada, the UK and the US have that power in least 5 areas of misconduct, including insider trading, market manipulation, false statements and inappropriate advice.
“Where there are gaps in [our enforcement] toolkit, this presents a barrier to us taking an optimal enforcement response, because the appropriate remedy is not available to us,” ASIC said.
“This can risk undermining confidence in the financial regulatory system,” ASIC said.
ASIC added that the current penalties in legislation have been in place for extended periods, and either not reviewed or only slightly reviewed.
“This has led to shortcomings in the consistency or size of penalties, which creates gaps between community expectations of the appropriate regulatory response to a particular instance of misconduct and what we can do in practice” the regulator said.
“A stronger penalty regime would allow us to deliver better market outcomes. It would improve the cost-effectiveness of our enforcement actions by maximising their impact and deterrent effect.”
ASIC have clearly indicated they have no respect for planners or the advice we give. Given that in some cases ‘inappropriate advice’ is an extremely subjective judgement call, the current system of FOS, ASIC and ultimately the courts is adequate. “Inappropriate advice” encompasses anything from fund selection, insurance amounts or premiums, taxation implications, health issues not disclosed to the planner to name but a few (check any FOS case histories and as a planner you will shudder at how some if the decisions against planners were made).
I would rather see an application by this mob to take harsher court action on clear cases of fraud or misappropriation as simply ‘banning’ someone from giving advice is extremely light weight.