ASIC’s new powers ‘to clean up industry’

New powers to reach deep into big banks and financial advisers will help clean up the industry, ASIC warns.

ASIC deputy chair Peter Kell. Picture: AAP

New powers to reach deep into big banks and financial advisers and ban individual managers will help clean up an industry that has “again and again” made promises to consumers it hasn’t kept, a deputy chairman of the corporate regulator says.

Peter Kell, who has oversight of financial services at the Australian Securities & Investments Commission, said the industry should get ready now for new powers to be granted to the regulator, rather than waiting for the Turnbull government to legislate them.

He said ASIC planned to gather industry-wide data that would tell consumers which companies were living up to their marketing promises.

And he said the regulator continued to focus on superannuation, which is to be the topic of financial services royal commission hearings early next month, with work under way on conflicts of interest at large funds, property investment by self-managed super funds and complaint-handling regarding insurance bought through super.

Mr Kell told an audience of fund managers, non-bank lenders and other finance professionals at a lunch put on by financial PR firm Pritchitt Partners that there was a crisis of trust in their industry.

He said the royal commission had highlighted the industry’s failure to live up to community expectations in areas as diverse as life insurance and the treatment of small business.

“We’ve seen an approach from financial service firms, that is focused on minimal or technical compliance with the law, has at times been allowed to override fairness and good customer outcomes,” he said.

“This ultimately can be quite corrosive when it comes to trust.

“The community expects that the services you provide will be beneficial or will have value and will deliver good outcomes, and they expect that those promises will be more than just marketing hype.”

He said new powers planned for ASIC, including the ability to intervene in the design or distribution of financial products and impose heavy new penalties, would give it a modern “regulatory toolkit”.

He added that ASIC’s plans to publish swathes of data on the performance of products would be a “game changer” for consumers, identifying “outlier” companies. “There will be pressure on those outliers to change,” he said.

Mr Kell defended ASIC’s decision not to revoke any of the financial services licences held by the big four banks and AMP despite a wave of scandals at the big end of town.

“It’s always something we will look at,” he said.

“Licensing action is not necessarily the best tool in the tool kit, and that’s where some of these new powers might help us a lot more.

“For some of the sorts of conduct that we’ve seen in the financial services sector it would be much better to target the manager that’s responsible for that part of the business.”

He said that in a large licensee the “really problematic conduct” could be confined to a relatively small area.

“You’re not going to get a case up where you can take away a licence,” he said.

Instead, ASIC wanted to target the person responsible and “take them out of the industry permanently — take away their livelihood, if necessary take criminal action”.