A new report by economist John Adams of Adams Economics has revealed that reports of alleged misconduct submitted to ASIC have approximately a 1 per cent chance or less of being officially investigated.
The scathing report, based on publicly available data issued by the regulator itself, suggests that ASIC’s performance has been on a slippery slope for several years despite the regulator being the subject of multiple inquiries and reviews as well as the Banking Royal Commission.
“There remains ongoing frustration across the community among investors, consumers and industry practitioners who are required to deal with ASIC,” Mr Adams said.
According to Mr Adams’ report — which considered a 10-year period spanning FY 2011–12 to FY 2020–21 — out of a total 134,542 reports of alleged misconduct made to ASIC, only 1,709 were officially investigated — equalling 1.27 per cent.
Moreover, Mr Adams reported a significant decline in the annual ratio of investigations compared to total reports of alleged misconduct from 1.90 per cent in the 2014–15 financial year to only 0.74 per cent in the 2020–21 financial year.
Of most concern, Mr Adams said, is that ASIC is getting worse when it comes to investigating alleged misconduct, with no improvement reported since the release of the royal commission’s final report which drew attention to the regulator’s insufficiencies relating to enforcement action.
Regarding reports of alleged misconduct from the Australian public that have been resolved, the report revealed that the percentage of resolved reports has consistently declined over the last decade, falling from 21 per cent in FY 2011–12 to only 9 per cent in FY 2020–21.
In nominal terms, the number of reports of this nature has dropped by over 63 per cent from 2,628 reports a decade ago to only 964 reports in 2020–21.
‘No empirical evidence’ to explain these trends
Importantly, Mr Adams said he “could not” identify any “empirical evidence or tangible justifications” which could explain these worrying trends — whether it be ASIC’s staffing and resourcing profile, the workload resulting from the royal commission or the COVID-19 pandemic.
In fact, Mr Adams noted, while ASIC often cites a lack of resources for performance mishaps and shortcomings, it received a major boost in March 2019 with an announcement by the then treasurer, Josh Frydenberg, that over $404 million would be injected into the regulator over four years — or a 25 per cent uplift in its annual funding compared to 2017–18.
Given these alleged irregularities, Mr Adams wants to see the Parliamentary Joint Committee on Corporations and Financial Services, or another suitable committee within the federal parliament, take urgent action to identify the root causes of these trends.
“It is incumbent on policy makers to finally get to the root cause of these issues and to propose real reform that leads to genuine and sustainable change,” Mr Adams said.
ASIC responds
In an emailed statement to ifa, ASIC explained that all reports received by the regulator are adequately investigated, including those where the recommendation is that no further action be taken.
“Every year, ASIC receives more than 10,000 separate reports of misconduct and possible breaches,” an ASIC spokesperson said.
“Every single report is examined and assessed — some for further examination, some for consideration by a more appropriate agency, or not warranting further action, and others referred for follow-up investigation.”
“These outcomes, year by year, are publicly available on our website and published in our annual report.”
The regulator’s most recent report revealed that 15 per cent of reports were referred for action, 9 per cent were resolved, and 65 per cent were analysed and assessed for no further action. A further 9 per cent were beyond its jurisdiction.
Regarding Mr Adams, the spokesperson said: “Two senior executives of ASIC agreed to meet Mr Adams (on 8 September, 2022) and hear his views about his ‘report’”.
“We will provide a response in the near future.”
Investigated??? what happened to that financial planner who allegedly churned insurance products where he had an option to transfer it (there was no transfer form). A big company complained about 49 clients to ASIC who this planner allegedly churned insurance products, but if ASIC investigated it further the new insurance products was more superior than existing and clients were paying a lower premium & material presented to ASIC was fabricated & grossly incorrect, to make it look like this financial planner is a not of good character. This person represented himself for 2 days against ASIC and only saw 20 physical client files, until now 29 physical client files are yet to be seen…. investigated properly???? this financial planner’s life was ruined due to ASIC’s incompetence, bias & lack of procedural fairness. Please keep going Mr Adams…. ASIC needs a royal commission on its own.
From my experience with ASIC 1% seems about right. You have to have lost money for them to consider investigating it, which means that if you are smart enough to realise the person is unlicensed or it is a scam then they don’t look at it.
Dont rattle the cage mate- ASIC will just INCREASE the Advisor Levy
Why would ASIC investigate? They already know who is guilty and who is innocent.
Licensed advisers are guilty. Unlicensed accountants are innocent.
Licensed advisers are guilty. Sales staff in union super call centres are innocent.
Licensed advisers are guilty. Real estate agents are innocent.
Licensed advisers are guilty. Finfluencers are innocent.
Licensed advisers are guilty. Fraudsters pretending to be licensed advisers are innocent, unless they steal more than $20M in which case ASIC will eventually investigate them, but still call them licensed advisers.
Real Estate agents did get in trouble once (during CODID) when there was a suggestion funds were being withdrawn from Industry Super under Covid rules – other than that – seems accurate.
You must be kidding. They did not get in trouble. ASIC asked them very nicely if they could stop the activity. No one was fined, named, shamed, or lost their livelihood. No consequences were felt at all. If anything it proves the point of the original post. If it was a licensed adviser doing the same activity could you imagine the steps ASIC would have taken.
ASIC are corrupt…too busy sending Advisers to jail due to spelling mistakes in a Fee Disclosure Statement. You left out the $2,000 boat from the SOA….go to jail. You’ve breached the corps law Mr Adviser we’re going to ruin you.
Because ASIC would rather ban Advisers who try their best to look after clients’ needs & best interests (in a practical sense of the words) but forget to dot an I or cross a T or send out a piece of paper late, rather than spend time running actual investigations into those who deliberately break the rules, lack ethics/morals, or are simply negligent. It’s easier runs on the boards for them and justifies their positions and funding.
What a shocker
Unless there is a dob in ASIC performance is poor or unless it against an individual for a small misdemeanor.