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‘We all have a role to play’: ASIC argues for whole of industry approach to misconduct

The corporate regulator has conceded that it can “never eliminate all bad actors”, however it believes a co-ordinated effort form all financial services industry participants can minimise the harm.

Speaking at the Institute of Managed Accounts Professionals (IMAP) Independent Thought Conference on Thursday, ASIC commissioner Alan Kirkland said the responsibility for good consumer outcomes falls on everyone within the financial system, not just the corporate regulator.

“For licensees generally, that means ensuring that you continue to fulfil your obligation to provide efficient, honest and fair financial services. For advisers, it means acting in the best interests of your clients, providing appropriate advice and prioritising their interests over yours,” Kirkland said.

“For fund operators, it means fulfilling your obligations as a responsible entity and licensee, including acting in the best interests of scheme members and providing efficient, honest and fair financial services for platform operators. That means continuing to perform your obligations honestly and with reasonable care and diligence.

“And for ASIC, it means ensuring compliance through our supervisory and surveillance work and addressing misconduct where we see it.”

Similarly, the commissioner pushed for industry members to hold others to account, pointing to the “devastating fallout” coming from the Shield and First Guardian failures.

“We recognise that the overall majority of financial services are doing the right things by their clients, but we also recognise, like you, that the behaviour of a small number of bad actors can cause significant harm to consumers and threaten the reputation of an entire industry,” Kirkland said.

 
 

“While we can never eliminate all bad actors, we need to work together to minimise the impact of misconduct. We all have a role to play in that. Licensees, it's your responsibility to ensure that advisers are acting in the best interests of clients, and that you have adequate monitoring and supervision arrangements to detect concerning conduct.

“Advisers, you're in a position, a unique position, to recognise where somebody has been the victim of poor advice from somebody else, individually and in co-operation with your peers, you must uphold and promote the ethical standards of the profession and hold each other accountable for the protection of the public interest. Where you detect concerning conduct, we encourage you to report it to ASIC.”

Notably, advisers had raised concerns over the Shield and First Guardian funds well ahead of the regulator taking action.

The Financial Advice Association Australia had “facilitated reports” to ASIC as early as 2023, according to CEO Sarah Abood, after its members had seen some of the advice being provided.

Appearing on Spotlight last month, Liberal senator Andrew Bragg railed against the seeming lack of urgency from the regulator.

“They were warned back in October 2023 from a very reputable financial services company that there was massive malfeasance here,” Senator Bragg said.

“They took almost a year to announce a proper full investigation. There are large businesses that have made complaints and warnings about First Guardian and ASIC ignored them.”

However, Kirkland insisted ASIC continues to “cut down on this conduct”, adding that its investigations go beyond the two highly publicised scandals.

“While they've dominated the headlines, they're not the only instances where industry professionals appear to be playing fast and loose with people's life savings,” he said.

“We've currently got active investigations into multiple high risk super switching matters, each involving multiple third parties and associates. In the case of Shield and First Guardian alone, we've got more than 40 staff involved in those matters, making it one of our largest enforcement projects in many years. We're scrutinising as part of that every part of the value chain.

“That includes the lead generators, the financial advisers, the advice licensees, the superannuation trustees that hosted the funds on their platforms, those involved in rating the funds, and the auditors and operators of the managed investment schemes themselves.”

At a parliamentary joint committee hearing into ASIC oversight in September, ASIC chair Joe Longo revealed that while Shield and First Guardian impacted around 11,000 consumers with approximately $1.1 billion of funds invested, the other funds it is investigating could see that number soar.

“I regret to inform the committee that it’s even more than that, because there’s a range of funds that we’re looking at, a range of investigations we’re looking at, and the number of investors that have been affected by this conduct, I would have thought, is closer to 25 or 30 thousand,” Longo said last month.