ASIC calls for ‘substantial increase’ to core funding

ASIC has complained its recent increase in funding falls far short of paying for what politicians and the public are demanding of it.

ASIC chair James Shipton. Picture: Kym Smith

The corporate regulator has complained its recent boost in government funding falls far short of paying for what politicians and the public are demanding of it, slapping down the piecemeal nature of project funding.

In its submission to the royal commission’s round of hearings on the superannuation sector, the Australian Securities & Investments Commission said the additional $35 million gifted to it by the government over two years to beef up its policing of the financial system was not enough.

It came as the banking and superannuation regulator defended its failure to take any fund or bank to court for a decade, hitting back at Royal Commissioner Kenneth Hayne’s slapdown of the watchdog.

The rebuke from the Australian Prudential Regulation Authority came the same day its chairman Wayne Byres was reappointed for another five years, as the regulator argued it needed more powers, and greater clarification between its role and that of the corporate watchdog, to tackle misconduct in the $2.7 trillion super sector.

Under pressure to adequately fund its financial watchdogs, the government on Monday announced an extra $60 million in funding for APRA after the regulator complained it needed more resources to police the financial sector. ASIC has also had its coffers boosted by $70m to help it enforce the law, but it is still complaining it comparable overseas regulators are three times better financed. The Commonwealth Director of Public Prosecutions has also asked for more funding to handle legal cases stemming from the royal commission.

In its submission published on Monday, ASIC said a “step change” in its funding would enable it to take legal action needed “to drive the necessary change in industry”, noting that even Treasury pointed out its funding has held steady for a decade despite its remit expanding considerably.

ASIC said it needed a “substantial increase” to its core funding sustained over time “rather than increments of short term project based funding”. The regulator pointed out the government did not adopt a Murray Financial System Inquiry to fund watchdogs on a three-year funding cycle subject to review, and noted a 2015 ASIC Capability review found on 15 per cent of external stakeholders believed it was “adequately” funded.

“If the community expectation is that ASIC’s default position should be to pursue all or even most matters through the courts, the increase in the level of resources needed is much more significant,” ASIC said.

The royal commission lashed both APRA and ASIC for failing to boldly launch legal cases against corporate misbehaviour, despite being aware of systemic and prolonged consumer gouging.

In a separate submission, APRA said it was launching an investigation into vertically-integrated wealth managers with super divisions, noting it was investigating “trustees operating within conglomerate groups that did not appear to exercise independence and prioritise the interests of their superannuation members over other parties in the conglomerate group”.

These included battered wealth manager AMP, Commonwealth Bank, National Australia Bank, Suncorp and IOOF. ASIC has proposed banning superannuation funds owned by companies with managed investment schemes as the conflicts are insurmountable.

While APRA said it backed the ban on so-called dual-regulated entities, it did not support a proposal to extend best interests’ duties to all related parties doing business with a super fund as it was “difficult to see how shareholders of trustees could reconcile such an obligation with other legitimate corporate interests”.

Responding to criticism it did not enforce the law, APRA said it “does not accept the premise that it has not generally acted promptly on misconduct or potential misconduct”.

“APRA is not dependent on formal enforcement actions to achieve appropriate outcomes,” it said, as it knocked back proposals to introduce a dedicated superannuation watchdog, mirroring suggestions from the Productivity Commission’s current review of the super sector.

“However, in reaching the above conclusion, APRA is not asserting that there is not room for improvement,” the regulator said.