‘Moral hazard’ in industry body regulation

In a submission to the ‘scrutiny of financial advice’ inquiry, Andrew Hungerford and Stephen Morrow of self-licensed firm Axiom Wealth expressed concern over calls to have ASIC deem certain industry groups as “professional associations”, for the purposes of the adviser register.

“Picking winners is something that should be left to punters not bureaucrats or politicians,” the submission states.

“There would appear to be a level of moral hazard involved in ASIC seeking to anoint particular professional bodies, particularly if this is done to the exclusion of other bodies or groups in the industry.”

The submission contends that associations deemed “professional” by the corporate regulator would receive an unfair boost to their “bottom line”, arguing instead that an “independently constituted panel” be given the task of overseeing the registration process and industry association membership issues.

“It has been our experience that, despite their articulations, some bodies do not adequately represent the breadth of interests within an industry or, as is often the case, they may put forward views that purport to be representative, but in reality they reflect the self interest of the professional body,” the submission argues.

A statement on the Axiom Wealth website explains that the boutique firm ceased its membership of the FPA in 2011.