However, following recent ASIC bans on Macquarie and Westpac advisers, and during a Parliamentary Joint Committee on Corporations and Financial Services hearing on Friday, Senator Deborah O’Neill said it was “alarming” to hear incidences of misconduct are occurring at big banks such as these.
“How can it be that you go to NAB, Westpac, ANZ, Commonwealth Bank just down the road, you meet your friendly teller and you get caught up in something like this?” she asked.
“What is going on in these places that this can still be happening?”
ASIC chairman Greg Medcraft suggested there is a lack of shared responsibility.
“In the US, they’re taking it one step further and looking to expand [its probes] beyond just the individual who is involved but to the management who is involved at the time the misbehaviour occurred,” Mr Medcraft said.
“One of the issues talked about in terms of why is there a cultural problem in banks today, many commented [because] many years ago banks were partners and there was a collective responsibility of the partners to make sure the right thing occurred.
“That’s why in the US they’re looking to recapture it as a group as opposed to an individual.”
ASIC commissioner John Price also advised that those recent bans were responses to misconduct which occurred before at least some of the FOFA laws were passed.
“One of the key aspects of those reforms is an obligation for advisers to act in the best interest of their clients,” he said.
“You might question whether it should have always been part of the cultural mindset of firms, but the fact of the matter is now it has been passed into law so I think that in itself will drive a significant change within large organisations.”
Senator O’Neill also asked how issues within the Australian financial services industry compared with those overseas.
“This is not a problem that is unique to Australia,” responded Mr Kell, “and I would say without a shadow of a doubt, for example, the experience in the UK has been considerably worse.”
In the past few weeks, ASIC announced it had banned a former representative of Macquarie Equities and former Westpac adviser. The sanctions are part of ASIC’s Wealth Management Project, which is targeting compliance in the four major banks, Macquarie and AMP.
Since the project was started in October 2014, ASIC has also banned from the financial services industry advisers Brett O’Malley, Brian Farber and Rebecca Locksley.
[quote name=”Jeff Morris”]The reason there are systemic problems in financial services, across major institutions – not just one institution, is because the Regulator, ASIC, has comprehensively failed to do its’ job. It is their slack, disinterested and downright incompetent conduct, their long term failure to regulate, that let the institutions get so out of hand. This was exposed in the ASIC/CBA Inquiry last year: CBA treats ASIC like the joke it is. It is simply staggering that there has not been a wholesale cleanout at the “weak and hesitant” regulator ASIC as a result of this Inquiry.What shouldn’t surprise anybody though is that, sabre rattling aside, nothing has changed in this industry with the same cold, dead hand on the tiller.[/quote]
Jeff, have a look at who’s on the Board for Law Societies. Have a look at who’s in the revolving door jobs at APRA, ASIC, FOS, COSL, Law Society EDRs. According to the Victorian Ombudsman, she couldn’t investigate a Society even if it was run by Charles Ponzi himself. Look at FOS – it’s unreviewable. Look at the TPP ISDS scheme – secret backroom “arbitrations” beyond judicial review. Slowly but surely, the big fish are making sure they can thumb their noses at anyone.
The whole process of AFSL’s and Auth Reps should be streamlined with advisers getting individual licensing like accountants. A limited liability scheme, no need to be tied to a dealer group, no product alignments, use who you want as long as you can demonstrate ‘best interest’ for the client.
It simple the reason it keeps happening is because of institutional licensing no one is held accountable. Individual licensing and responsibility is the solution but of course that would end the dominance of the big banks and insurance companies wouldn’t it and the truth is none of the politicians has the guts to stand up to them despite the rhetoric and hand wringing they display in public hearings to fool the voting public that they are actually doing something to fix the problems.
Parliament needs to look more deeply into the issues that are being caused by vertical integration.
The ongoing disclosure requirements have increased the risk and cost of documenting advice to the point where IFAs are succumbing to the incentives offered by manufacturers to join their subsidised offerings.
The whole approach needs to be re-engineered. Make ASIC responsible for product – who’s failures arguably cause 90% of the financial losses to retail consumers.
Then have the industry bodies focus on lifting education standards and using membership to encourage the behaviours we expect from licensees and their advisers.
Disclosure does not work – survey after survey of the consumer gets the same result – try something different.
The reason there are systemic problems in financial services, across major institutions – not just one institution, is because the Regulator, ASIC, has comprehensively failed to do its’ job. It is their slack, disinterested and downright incompetent conduct, their long term failure to regulate, that let the institutions get so out of hand. This was exposed in the ASIC/CBA Inquiry last year: CBA treats ASIC like the joke it is. It is simply staggering that there has not been a wholesale cleanout at the “weak and hesitant” regulator ASIC as a result of this Inquiry.What shouldn’t surprise anybody though is that, sabre rattling aside, nothing has changed in this industry with the same cold, dead hand on the tiller.
At one end of the Vertically Integrated chain is the Board of Directors with a legislated profit motive. At the other (consumer) end of the Vertically Integrated chain is an adviser, now with a legislated Best Interests Duty. The point where the two meet is stupidly referred to as “a break down in culture”.
There isn’t a break down in culture. There are two opposing sets of rules and expectations clashing.
As an adviser, I’m glad the BID rules have moved the breaking point into management ranks and away from advisers, but the fundamental conflict remains.
Either ban VI operations, or change the legislation.