The $127.2 million reform package to strengthen ASIC will allow for "major shadow shop" operations and other projects in the financial advice and life insurance sectors, the corporate watchdog has said.
Federal Treasurer Scott Morrison announced yesterday it will equip ASIC with the stronger powers and funding that it needs to combat misconduct in the financial services industry.
Speaking to the media yesterday, ASIC deputy chairman Peter Kell said that extra funding will allow for a "series of extended additional projects", including shadow shop operations in which an ASIC member poses as a consumer.
"There are some major areas that we will be focusing on with the money over the next few years [including] financial advice, which has already been a subject of a lot of action," Mr Kell said.
"We will be focusing in a very significant way on the insurance sector. There will be a range of reviews where we will be aiming to lift standards and reduce misconduct."
Mr Kell added that the industry-wide review into claims handling, which followed the CommInsure scandal, will now be expanded.
"That will now be expanded and we will be able to undertake follow-up action there, including claims handling within the major insurers and within the banks," he said.
"We'll be undertaking a review of the direct sale of life insurance and also some of the problematic practices relating to add-on insurance products."
According to Mr Morrison, the extra funding will be paid for by the financial services industry via a user-pays model from 2017 to 2018. ASIC said the area it spends the most time scrutinising will be the one that bears most of the costs.
"Many of those (expanded) reviews are either focused on the banking sector or have the banking sector as a major element there," Mr Kell said.
"We want to ensure that as a result of that we are getting better outcomes, higher standards, right across the sector."
Responding to the government's decision, The Australian Institute of Superannuation Trustsees (AIST) said while it welcomes the increased funding, there needs to be greater accountability and transparency from ASIC.
"We agree with the findings of the Financial System Inquiry, that ASIC's costs are not transparent to participants in the financial services sector," said AIST chief executive Tom Garcia.
"However, we must ensure the funding of ASIC is not built up as a solution to all problems facing the financial sector – there are still systemic problems that have to be dealt with that are outside the regulator's brief."
At the same time, Governance Institute Australia said the "one-off" funding does not address the more urgent need for a "substantial, long-term funding model" for ASIC.
"The $127 million funding increase is a positive move but at the end of the day, all it does is restore ASIC's coffers to their level prior to the 2014 Budget cuts," said Governance Institute chief executive Steven Burrell.
“It is also disappointing that the government appears to be walking away from its responsibility to fund ASIC. The Treasurer has said that funding in the future will come from levies imposed on market participants, even though the FSI never envisaged that the ‘user-pays’ funding component would completely replace government funding."
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