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ASIC wealth management enforcement surges

4 minute read

ASIC chair James Shipton has reported a 166 per cent increase in wealth management enforcement investigations from February last year to this past month, in response to the royal commission.

In his keynote address to the Committee of Economic Development of Australia (CEDA), Mr Shipton expanded on the regulator’s approach and its key strategies for the next 12 months, including its amplified enforcement and newly gained product intervention power.

He also alerted CEDA that the body is also looking to update its responsible lending guidance, the requirements of which have remained unchanged for nearly a decade. ASIC is holding a public consultation on the matter.

Comparing to February last year, there has been a 21 per cent increase in the number of ASIC enforcement investigations, a 74 per cent increase in cases involving the big six (or associated officers and subsidiaries) and more than double the number of investigations in wealth management.

Mr Shipton added that since the watchdog’s last public update, certain penalties and regulator tools available to ASIC have been strengthened by new legislation. The body has gained increased penalties for offences, the creation of design and distribution obligations and the granting of ASIC’s new product intervention powers.

He also noted ASIC is establishing an Office of Enforcement, responsible for enhancing its investigation and enforcement.

“There are high community expectations on ASIC and the financial sector right now,” Mr Shipton said.

“Importantly, we have very high expectations on ourselves and the firms and people we regulate. Ultimately, all of us, the regulators and the regulated, must strive for a fair, strong and efficient financial system for all Australians.”

The regulator yesterday opened consultation on its new product intervention power where ASIC can step in and take action where it deems financial products have resulted in or are likely to result in consumer detriment, without there being a breach of the law.

ASIC is now able to enforce temporary actions such as banning a product or feature, impose sale restrictions and amending product information or choice architecture.

The body is also able to use the power on a market-wide basis to try to address industry-wide problems.

“The product intervention power is an incredibly important addition to ASIC’s regulatory toolkit,” Karen Chester, ASIC deputy chair ASIC, said when launching the consultation.

“ASIC can now step in and respond to significant consumer detriment in a targeted and timely way. But there are also important checks and balances – it is a temporary intervention power and we must consult before each and every use.”

She added ASIC is joining its overseas counterparts in the US, UK, EU, Hong Kong and Taiwan with product intervention powers.

The consultation on the product intervention power will close 7 August. ASIC said it is aiming to release its final regulatory guide in September.

The design and distribution obligations on the other hand will not apply to industry until April 2021, with a separate consultation on its proposed guidance to commence later in the year.

On ASIC’s strengthened enforcement work, Mr Shipton commented: “I want to be clear, the ‘Why not litigate?’ discipline we have adopted does not mean ‘litigate first’ or ‘litigate everything’.

“The aim of this discipline is to ensure that we are doing our job to deter future misconduct and fulfil community expectations that wrongdoing be punished and publicly denounced through the courts.”

In its supervision, ASIC has been undertaking its CCM approach.

“We emphasise that while the objective of supervisory activities is preventative in nature, if ASIC identifies illegal behaviour during the course of our supervisory work, we will actively consider the appropriate regulatory response, including enforcement,” Mr Shipton said.

“Ultimately, the first line compliance responsibilities sit with licensees. Our supervisory efforts are aimed at improving financial firms’ ability to fulfil that cornerstone responsibility.”

Since commencing CCM with large financial institutions, Mr Shipton reported ASIC staff have been onsite for 119 days since the program’s launch in October.

ASIC also recently released its indicative industry levies for the 2018-19 financial year, baring that the investment management and superannuation sector could be paying total costs 32 per cent higher than the prior year.

The large institutions subject to CCM have a collective estimated levy of $3.56 million.

Sarah Simpkins

Sarah Simpkins

Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth. 

Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio. 

You can contact her on [email protected].