ASIC accused of ‘ticking boxes and not looking at answers’ in Sterling collapse inquiry

During a Senate inquiry into the collapse of the Sterling Group on Thursday (18 November), FPA head of policy, strategy and innovation Ben Marshan was asked by senator Louise Pratt if he was aware of the processes of the regulator after it was accused of a delayed response into the matter earlier this week.

“ASIC collects a lot of information from financial services, firms and licensees. Whether or not it actually looks at any of it or considers the risks or takes proactive action based on the information they collect would be the question I would ask,” Mr Marshan responded.

When pressed on the purpose behind ASIC collecting information, Mr Marshan replied: “To be blunt, it’s ticking a box.

“The law requires you to provide a particular piece of information – tick, it’s been provided.

“There’s no consideration of what the answer is. There’s no consideration of if the answer would lead to a higher risk weighting for that particular product or that particular licensee or that particular scheme.

“If all you’re doing is ticking boxes and not looking at the answers, then this is the outcome that occurs.”

In the Senate inquiry which began on Tuesday (16 November), corporate litigator and investigator Niall Coburn – who also previously served as a senior specialist adviser to the corporate regulator – said ASIC failed to protect consumers.

The Sterling First Group eventually collapsed in 2019, leaving more than 100 customers facing possible eviction and heavy financial losses.

Earlier in the same inquiry, ASIC chair Joe Longo conceded that the regulator had received complaints about matters related to Sterling in late 2016, however it did not become officially involved until a referral by the Western Australia Department of Mines, Industry Regulation and Safety in March 2017.

Mr Longo said ASIC did receive “two or three complaints or reports of misconduct… in late 2016, early 2017”, but did not believe further action needed to be taken.

Mr Marshan continued: “It demonstrates the benefit of a relationship with a professional financial planner in understanding the risks of these types of products.

“In terms of the regulator and the way they’re regulating… consumers expect [that] when a product is regulated by the regulator that there is some form of check or some form of quality assessment that it’s fit for purpose for a consumer to invest in.”

In the inquiry, the FPA recommended that all financial products and services should be “compelled to investigate and compensate for misconduct” through the new breach reporting regime and that government’s proposed Compensation Scheme of Last Resort (CSLR) be extended to cover all financial products and services and not just distributors.

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.