AFA takes aim at ASIC ‘regulatory overreach’

In its submission to the Senate economics references committee’s Australian Securities and Investments Commission (ASIC) investigation and enforcement inquiry, which was launched in November last year, the AFA said that the regulator enjoys an unfair reputation as being “soft touch”.

“In our view, ASIC was subject to unfair criticism of being a soft touch regulator as part of the fallout from the Hayne royal commission. That has certainly not been our experience,” the submission said.

“In fact, we believe that ASIC is a very vigorous regulator who has been very tough on many in the financial advice sector. We believe that this criticism was framed in order to force ASIC to be tougher than they already were.”

The industry body, which made its submission ahead of its merger with the Financial Planning Association of Australia (FPA) to form the Financial Advice Association of Australia (FAAA), added that the criticism of ASIC does not match up with reality.

“It is interesting to contrast the criticism that ASIC received about their approach, with the approach to regulatory oversight in other sectors, including the medical profession, where recent media coverage would suggest that there is a much looser regime,” the submission said.

“Over recent years, there has also been coverage of other regulatory regimes, including the gambling sector and the construction industry, that highlights how vigorous ASIC has been in comparison,” the AFA added.

The AFA also took aim at possible regulatory overreach, specifically related to Regulatory Guide 277 – Consumer Remediation, Information Sheet 256 – Ongoing Fee Arrangements, and Information Sheet 206 – Advice on self-managed superannuation funds – Disclosure of Costs.

“ASIC has in the past set the rules for the financial services industry where they did not necessarily have the power to do this. Regulatory Guides and Information Sheets are not rules, nor legislated obligations, however, they are often enforced in a vigorous manner,” the submission said.

The association said that there were issues with ASIC’s approach to investigations and enforcement, which it said creates “angst and anxiety in the financial advice population”.

The AFA pointed to one particular case in which a member was subject to a multi-year investigation and a 15-hour joint raid, despite there being no consumer detriment.

“We are also aware of one member who was the subject of an ASIC investigation and enforcement action that seemingly went for two and a half years, and ultimately ended in an enforceable undertaking,” the submission said.

“During this process, this member, despite receiving multiple ASIC notices, struggled greatly with having any meaningful interaction with ASIC, and ultimately chose to escalate the matter. They also reported to us the experience of having a joint AFP/ASIC raid that went for 15 hours.”

The Senate launched the inquiry to examine ASIC’s capacity and capability to commence a proportionate investigation and enforcement action stemming from reports of alleged misconduct.