Are ASIC and the government on the outs?

The government’s shock announcement last week that it would assume responsibility for the much-anticipated review of LIF commission settings due in 2022 put paid to tension that has been growing in the sector as insurers, licensees and adviser bodies join forces against a truculent regulator to make the case for the retention of risk commissions.

While commissioner Kenneth Hayne’s comments that “unless there is a clear justification for retaining [risk] commissions, they should be reduced to zero” continue to hang over the industry’s head, ASIC has been reluctant to confirm what such an evidential threshold would be.

“I do not have a number that we put in place on that – we need to do both the pre and post review to see whether there has been an improvement,” commissioner Danielle Press said to Coalition MP Bert van Manen at a recent parliamentary hearing, when asked what ASIC was looking for to prove advice quality had improved in the years since the laws were put in place.

“The framework for the review has been discussed and agreed with industry, and to your question about what number we are looking for, we will give our results to government and they will decide what policy implications come from that. It’s not ours to say what is good or bad.”

While the regulator may have been publicly sticking to a data-driven approach, questions have been asked in recent committee hearings around the selectivity of its data and resulting enforcement outcomes, with a number of Coalition senators and MPs pointing to poor advice in the super sector that has not been acted on in the same way as insurance.

Financial services minister Jane Hume’s decision to roll the review powers into Treasury, similarly to her recent announcement that the government would be taking charge of adviser standards setting in future, seems to be a move to neutralise any rogue outcomes that could arise from ASIC’s data selection and allow more direct input from industry.

The regulator is in the doghouse in more ways than one at the moment, as soaring industry levies have seen the 10 largest licensees pay for around 20 per cent of total ASIC funding costs since the move to an industry funding model, while the regulator and Treasury are at odds to agree whose fault that is.

It also doesn’t help that the scandal around outgoing chair James Shipton and former deputy Daniel Crennan’s expenses has made an embarrassment of the regulator’s aggressively by-the-book approach to enforcement since the royal commission. 

While both were seemingly officially cleared of wrongdoing by Vivienne Thom’s independent inquiry, ex-Australian journalist Anthony Klan recently pointed out that the terms of reference of the review were never designed to make adverse findings but merely “findings of fact” – in other words, to sweep another public ASIC bungle under the carpet as quickly as possible.

After months of copping political flak around restrictive interpretations of the law from both FASEA and the regulator, and with advisers indicating they will seek revenge at the ballot box in the coming months, the Coalition seems to finally be looking to streamline layers of the regulatory ecosystem and place as much of it as possible under Treasury’s direct control.

With a question mark still hanging over who will replace Mr Shipton as head of the top cop later in the year, it appears Ms Hume and the government are taking no further chances with outsourcing important industry business in the lead-up to an election. After all, as the saying goes, if you want something done right, do it yourself.