Speaking at the Governance Institute of Australia National Conference this week, ASIC commissioner John Price said that, by ASIC’s tally, the costs of remediation for misconduct in the financial system in recent times amounts to $9 billion.
“That sounds to me like a figure that indicates a real financial impact,” he said.
Mr Price singled out AUSTRAC’s civil penalty orders against CBA, APRA’s inquiry into the bank and the publication of its final report in May 2018. The report was promoted as required reading for all institutions as it highlighted the dangers of failing to manage non-financial risks.
The commissioner also noted that as a direct result of the royal commission, consumers are now starting to avail themselves of their rights.
“The increase in the number of complaints made to AFCA (and indeed to ASIC) post the royal commission start date has been staggering,” he said.
In the 2019 budget, the government provided more than $550 million to APRA and ASIC to ensure there were “necessary resources to discharge their expanded remit and address misconduct”. Of that sum, $146 million was given to support ASIC’s litigation strategy.
“In light of these changes in terms of public policy and regulatory frameworks, consumer behaviour and regulatory approaches it is useful to reflect on a recent survey about regulatory engagement by the Governance Institute and Lexis Nexis,” Mr Price said.
“When asked how they characterise their regulatory approach, almost 50 per cent of respondents collectively said defensive or reactive, instead of proactive.”
Meanwhile, 40 per cent of companies said they have no strategy for dealing with regulators and 70 per cent said the royal commission won’t impact their approach to remuneration.
“I can’t help but wonder two things,” Mr Price said.
“First, has the wise counsel from the APRA CBA report to ask ourselves ‘should we, not can we’ got through to all levels of corporate Australia?
“Second, given that reactive or defensive conduct toward regulators and the absence of a regulatory strategy was a feature that led to the events I have mentioned today – is doing the same thing again and expecting a different result a prudent course?”
Cannot sign
I was wondering why my claim wont take my mobile phone number
What???
John: you seem to be saying that AFSLs should have a strategy for dealing with regulators. If regulators were consistent and predictable why would people need a strategy to deal with them. While ASIC watched on, at least $9 billion worth of mischief happened. Not sure you should be gloating.
Corporates don’t care about fines!
They don’t care because their employees and are supposed to meet KPI’s and targets. If they get caught doing the wrong thing, the company blames the employee and uses them as a scapegoat. Any fines imposed come out of shareholders profits. Any losses are made up with new fees charged to customers to increase the bottom line. The sucker at both ends of the play, being wronged and paying for it is the consumer NOT the entity that caused it!
You can’t fix the problem with the same thinking and practices that caused it in the first place.
Until the corporate heads are seriously penalised financially in person and jailed for misconduct, these honchos will continue in the same cowboy rodeo. The adviser is always expendable and an easy target for the entities and the governance (ASIC – government – legislation etc). Someone pulls a chain and just flushes away a career and lifetime of advice, learning and education, while those above just write a cheque for remediation.
Maybe they have not considered the possibility that there are those who will not be reacting or changing bevausr.they wee doing things properly in the first place.
Thanks John Price. Ever provided personal advice before? 40% of companies have no strategy because they know they are F&*KED if they even attempt to stick up for themselves.
When are you going to have your team of public servants start engaging meaningfully with AFSLs and advisers so we know EXACTLY what we are supposed to be doing!