Speaking at a NSW chapter meeting of the SMSF Professionals’ Association of Australia (SPAA) yesterday, ASIC senior executive leader, financial advisers, Joanna Bird explained the regulator is often hamstrung by a lack of viable tools to remedy wrongdoing in the financial services market.
"You can only take a criminal action if there is a criminal penalty available," Ms Bird said.
"With things like inappropriate advice and failures to comply with licensing obligations, there is no criminal penalty available to us, so we can’t take a criminal action," she said.
"In these cases the only real options available to us is an enforceable undertaking or a licensing action, such as taking away the licence – which is a high-risk proposition – or imposing conditions on it," Ms Bird said.
However, Ms Bird – who is also a former associate professor at Sydney Law School – said that the FOFA legislation has given ASIC access to new remedial avenues, such as a number of new civil penalties for breaches of financial planner fiduciary duty, for example.
While administrative actions – such as banning orders and EUs – are “preferable” because they are less time-consuming and “have the ability to actually change the way a business is constructed”, Ms Bird said the new civil penalties have other benefits for the regulator."
"There would be some merit to us taking some of the civil penalty actions because they go through court, and are a much more public outcome which may be a much better way of sending a message to the market,” Ms Bird said. “These actions can be high-impact regulatory actions.”
The FOFA-led penalties have added crucial options to the “regulatory toolkit” available to ASIC’s various teams, she said, adding that the corporate regulator has a three-pronged approach to deciding which toolkit item is appropriate.
“We will choose a response that takes into account the nature of the conduct, the market impact we wish to make and our own resources and how much we can devote to that particular misconduct,” Ms Bird said.