Senator Andrew Bragg is demanding a comprehensive review of the regulatory framework through a new Financial System Inquiry (FSI).
Speaking at an FSC event on Thursday, Mr Bragg said the existing system, implemented over 25 years ago under the Twin Peaks model, harbours significant structural issues that pose risks to the nation’s economic standing, job market, and innovation.
Mr Bragg highlighted the need to shine a spotlight, particularly on the Australian Securities and Investments Commission (ASIC), arguing that the regulatory body has strayed from its fundamental duty of enforcing corporate law, becoming more focused on self-promotion and deflecting media criticism.
“In the last financial year, it was revealed that even the Great Barrier Reef Marine Park Authority had made more referrals to the CDPP than ASIC,” Mr Bragg said.
On the advice front, the senator is particularly alarmed by the rapid increase in the levy charged to advisers.
Speaking to ifa following his address, Mr Bragg admitted that the levy system itself is something that needs to be scrutinised further.
“I’m not sure it’s the right system,” he said, and proposed a system in which the corporate regulator retains regulatory fines and uses the proceeds to finance its regulatory initiatives.
“When the industry-based funding was established, it was never designed to be bashing individual small businesses over the head with 150 per cent increases in one go. That wasn’t what it was designed to do, we also at that stage didn’t have a massive drought of advisers. There’s never been enough, but now there’s a massive drought,” Mr Bragg argued.
“We’re very keen to try and alleviate the cost of financial advice because we know there’s not enough financial advice being given in the country.”
Last week, Mr Bragg asked some tough questions of the Labor government at Senate estimates.
Questioning Treasury officials over the 150 per cent increase in ASIC levies charged to advisers, Mr Bragg sought clarity on how Labor’s support for the levy increase aligns with its commitment to reduce the cost of advice.
However, Mr Bragg’s questions were met with a tense silence, the palpable tension evident even through the virtual setting.
Eventually, Treasury official Brenton Philp said: “Senator, they are two different things.”
Mr Bragg then asked: “Isn’t the government levy an input cost for those businesses that are providing financial advice?”
To this, Mr Philp replied: “Yes.”
However, he stopped short of acknowledging that this heightened “input cost” would probably result in an escalation of the cost of advice due to advisers needing to generate more revenue to cover their increased business expenses.
Need for an FSI
Speaking on Thursday, Mr Bragg said he also harbours concerns about the Australian Prudential Regulation Authority (APRA), particularly in relation to its “failure to clamp down on breaches of the best financial interests duty” among superannuation funds, and a seemingly slow response to investigating financial transactions between super funds and unions.
As such, he stressed that a new FSI could provide an opportunity to address not only the issues with ASIC and APRA but also broader concerns, including the influence of the superannuation system on the economy, tax considerations, housing challenges, and the impact of digital disruption on the financial sector.
The last FSI occurred almost a decade ago and is considered by some as instrumental in recommending reforms that significantly shaped Australia’s financial landscape.
This FSI, according to Mr Bragg, should:
- Undertake a proper review of payments which looks at economic and geostrategic matters collectively.
- Examine the tax points in the sector to ensure competitiveness and efficiency.
- Specifically look to how the financial sector arrangements may be recalibrated to help solve our great national challenge of housing younger Australians.
- Consider the influence of superannuation over the economy.
- Look for opportunities for deregulation such as duplication which exists in prudential standards and legislation – including responsible lending.
- Consider the value of standardised terms and consumer disclosures.
- Consider the overall regulatory architecture, the “regulator of regulators”, and the role of the Council of Financial Regulators.
“We need vision to capitalise upon the opportunities and maintain our base as a regional hub for financial and professional services,” Mr Bragg concluded.
Is this the case?
ASIC is: –
– setting the regulations
– enforcing/monitoring compliance with regulations
– charging those it regulates to comply with regulations
– Administrative powers to cancel and suspend those it regulates.
Does this have any place in a democracy?
What could possibly go wrong?
The medical profession doesn’t have the government oversight financial services dies but also gets subsidised billions through Medicare. Financial services has been over regulated by a nuisance bias ignorant asic for too long. good on Bragg for calling it out.
Hear Hear! to Anonymous re self-regulation.
If self-regulation can’t work, neither can bloody-minded bureaucratic regulation!
ASIC’s priority, as with any large entity, regulatory or otherwise, is self-preservation by aggrandisement.
ASIC has grossly exceeded its brief to the detriment of consumers, advisers and the financial services industry as a whole.
Hail Senator Bragg!
With my 2 AFS licenses 342895 and 345470, on 4 February I submitted Waiver of Financial Adviser Levy with reasons and 4 supporting documents allowed in ASIC’s Regulatory Portal. As at 23 February, no response. Back on 8 September 2023, I received a letter from Tim Baird, Assistant Secretary – Financial Services Division in Treasury who wrote that consideration would no longer be given. Back a year ago, Hon Stuart Robert said in public that Treasury is making 1.6 times ASIC’s enforcement costs. Obviously, Treasury is using ASIC Cost Recovery Legislation to extort $46.4 million out of financial advisers and that silo in front of Senator Bragg pretends it will not increase the cost of advice. When I have to pay $49,000 in ASIC levies, I will have to lodge a Breach Report with ASIC that it took away all cash held in reserve for the Excess required in Professional Indemnity insurance claims. Then ASIC will (stick its nose in the air) give its Standard Reply, “it is your problem to maintain your regulatory obligations”. Then when I notify Lloyds of London PI insurer, if they will not renew our PI cover, ASIC will cancel our AFSL licenses. Then the big winner is Treasury extortion bludgeoning and the loser is the clients of 10 advisers, more than 1000 mums and dads lost advice that cared for them over the last 20 years. All because the Treasurer was sucked in by Treasury’s IFM Final Report dated 26 June 2023, which gilded the lily with circular arguments and avoided qualitative legal research – another Robodebt government scam. It is the ignorance of Treasury’s public law destroying the social welfare needs of existing clients provided under private law arrangements with financial advisers.
Senator Bragg is correct and the only person in Canberra with half a clue about Advice & the broader financial services system. We should be self regulated through professional bodies and that’s it. No asic no government an actual profession
According to ASIC there mandate is “Our role under the ASIC Act is to: maintain, facilitate and improve the performance of the financial system and entities in it. promote confident and informed participation by investors and consumers in the financial system. administer the law effectively and with minimal procedural requirements.”
They have massively failed.
A full and thorough investigation into ASIC’s practices and funding mechanism is long, long overdue.
ASIC have had a major brand issue for the last 15 years in that the vast majority of Financial Advisers have zero respect at all for the regulator and strongly believe the regulator’s attitude toward Financial Advisers is no different.
ASIC have regularly stuck their nose in to issues that quite frankly is none of their business.
It was very evident during the ridiculous FASEA period of negotiations and submission process around the flawed Code Of Ethics debate where ASIC were in constant contact with representatives of FASEA providing so called ” guidance ” on clauses and wording but specifically were identified in emails to have requested FASEA keep it quiet and their correspondence did not equate to advice in respect to the wording suggestions.
In addition, ASIC then funded 2 academic’s from Griffith University to prepare a consumer-focused report deriding Financial Advisers ethics in the full knowledge that CHOICE had already submitted a consumer submission to the FASEA Code of Ethics process.
ASIC are flawed and these examples clearly identify they are not independent or unbiased in any way at all.
It is unconscionable the regulator has been shown to previously attempt to influence the outcomes of these matters.
Seems to be a strange culture within ASIC – I also recall around that time ASIC had was paying individual staff members tax bill? and someone’s rent? (can’t imagine how one gets Human Resources to make those payments if they are not proper)?
A full Royal Commission into ASIC would be wonderful.
Not a royal Commission but have you read the FRAA report: https://fraa.gov.au/sites/fraa.gov.au/files/2022-08/asic-assessment-report.pdf
Yes, and Mr Bragg should be asking about the process within ASIC to appoint former CHOICE CEO Alan Kirkland and whether it was a fair and just process and what other candidates were considered or conflicts of interest, why they fund CHOICE, the links with Super Consumers Australia via CHOICE & ASIC. It must be a coincidence the adviser hating Alan Kirkland was appointed a commissioner.
In addition to that, ASIC should be grilled on the aspects within finance markets they clearly neglect. There are hundreds of millions being lost by retail investors on the micro cap stocks within the ASX because they get caught out by dubious practices from “lifestyle” company directors, insider trading, Stockbrokers getting deals for sophisticated investors while shafting small time retail investors, share price manipulation. It’s all there for ASIC to look at but I bet they hardly respond to any complaints or even look.
The other area a lot of money lost is financial scam, and unregulated advice.
ASIC should not have any role in financial advice regulation. They have made a complete mess of it. Thanks to ASIC, professional advice has become too complex and expensive for most consumers, while dangerous illegal advice and scams have flourished.