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ASIC planning FOFA enforcement

ASIC is currently considering a "range of matters" for enforcement including "some that involve potential breaches of the new FOFA laws", says ASIC deputy chair Peter Kell.

In a heated exchange with Labor Senator Sam Dastyari on Friday afternoon, Mr Kell said that despite the regulator's publicly announced 12-month 'facilitative' approach to FOFA (set to end on 1 July 2014) it is still enforcing the law when there are "egregious" breaches that involve harm to consumers.

Using his position on the Parliamentary Joint Committee's Oversight of ASIC panel, Mr Dastyari pressed Mr Kell on a line of questioning he first pursued on 26 February.

Mr Dastyari tabled a notice published by the regulator about fee disclosure statements on 20 December 2013 in which ASIC stated it would “not take enforcement action in relation to the specific FOFA provisions that the government is planning to repeal”.

Given the government's recent decision to 'pause' the FOFA amendments, Mr Dastyari asked whether ASIC would be continuing its current approach to the law as it stands.

“We are still well within the facilitative implementation period, which ASIC publicly announced and flagged as the approach that we would be taking in the first 12 months,” replied Mr Kell.

“We do not intend to alter our approach at this point in time. We are liaising with the government and obviously we are paying attention to the process that’s currently occurring around the reforms,” he added.

ASIC is keeping the unfolding events under “close review” – including any considerations that might cause “potential detriment to consumers”, said Mr Kell.

“If we need to moderate our stance given the change in the timing we will consult and clearly communicate as soon as possible,” he said.

But for the time being, if licensees commit breaches of the law that “are not causing consumers harm” or are “not serious breaches that are going to damage the industry” ASIC will not be pursuing them, said Mr Kell.

“The balance is between assisting the industry to implement complex and new reforms as efficiently as possible and so ensuring investment protection is not compromised,” he said.

“It wouldn’t be sensible for us at the moment to initiate legal action on say a technical breach of the law if that law is soon after repealed,” said Mr Kell.

But Mr Kell was keen to stress that despite ASIC's facilitative approach, it “doesn't mean that we're not taking enforcement action in relation to egregious or harmful conduct in the financial planning sector”.

He pointed out that since the beginning of the 12-month facilitative period on 1 July 2013 the regulator has banned 10 people permanently from the industry, removed five others, cancelled nine licences and obtained four enforceable undertakings.

“We also have a range of matters that we’re considering for enforcement, including some that involve potential breaches of the new FOFA laws,” he said.

Asked whether ASIC has had discussions with Finance Minister Mathias Cormann about the implementation of the FOFA laws, Mr Kell said it had not.

In addition, ASIC did not know the FOFA amendments would be put on hold (pending further consultation) before Mr Cormann made the announcement to parliament, said Mr Kell.

“We are monitoring these developments very closely, and we’ll consider the length of delay and the development of the reforms as they’re taken forward,” he said. 

“Our current position is quite clear, and it’s the government’s position that they’re planning to go forward with these reforms subject to this consultation,” said Mr Kell.


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