With ASIC, you get what you pay for
Mike Taylor writes that as a former ASIC executive, ASFA chief executive Pauline Vamos has managed to spice up the submissions to the Senate Committee reviewing ASIC’s operations.
Among the hundreds of submissions now filed with the Senate Committee reviewing the performance of the Australian Securities and Investments Commission (ASIC), few are as significant as that filed by the Association of Superannuation Funds of Australia (ASFA).
That is not because ASFA is any more important than any of the other industry organisations such as the Financial Services Council (FSC), the Financial Planning Association (FPA) or the Association of Financial Advisers (AFA).
The significance of the ASFA submission lies in the signature appended to its final page – that of the organisation’s chief executive, Pauline Vamos, who was a former senior executive officer within ASIC and arguably has a better than average knowledge of the regulator.
Vamos is a lawyer who found herself working inside ASIC as director, financial services regulation, licensing and business operations at the time the former Howard Government was seeking to devise and implement the Financial Services Reform Act.
Given the number of years Vamos has now headed up ASFA, she has been able to weigh the effectiveness of her former employer ASIC against that of its sister regulator, the Australian Prudential Regulation Authority (APRA) and, of course, the Australian Taxation Office (ATO) as the dominant regulator of self-managed superannuation funds (SMSFs).
Given all of this, it is worth noting that the ASFA submission does not overtly criticise the performance of ASIC but, rather, suggests that with better resourcing and a more focused approach to its role, ASIC could do very much better.
Indeed, the submission kicks off with the unmistakable message that the regulator might do a great deal better when pursuing legal action if it were appropriately funded and resourced to pursue such high-profile legal action.
“ASIC should be funded to allow it to utilise legal services of comparable quality to those employed by Australian businesses and individuals when defending themselves in actions taken by ASIC.
"The potential inadequacies with respect to the ASIC legal resources budget may create difficulties for ASIC when pursuing legal remedies or enforcement action against entities or persons alleged to have contravened legislative obligations,” the submission said.
This appears to be a reference to some notable court losses by ASIC in circumstances where those parties the regulator had sought to pursue have been able to call on the resources of some of Australia’s best-known and highest-priced law firms.
The ASFA submission continued, “ASIC needs to be appropriately resourced generally. The current structure and resourcing of ASIC limits its ability to influence the industry and the resultant criticism which ASIC receives in respect of delayed action can erode public confidence”.
“ASIC should be armed with the power and resources to be in a position to better monitor internet and telemarketing scams and to work with international regulators and law enforcement bodies to catch and shut down such scams and, if possible, to recover money obtained by misrepresentation, fraud or identity theft.
“This includes dealing with situations where members transfer their superannuation from Registrable Superannuation Entities (RSEs) to real or fake self-managed super fund (SMSF) accounts and then find it has been invested inappropriately, accessed illegally or transferred off-shore.”
Nor did Vamos hold back in giving her views as to ASIC’s general approach, saying that, as a regulator, it needed to be clearer on its regulatory approach and style.
“There is a degree of uncertainty in the industry on the ASIC approach to consultation, supervision and enforcement. This is a particularly important matter in areas where there is an overlap between APRA and ASIC.
“At present, ASIC’s engagement with the superannuation industry is largely limited to registration, reporting and enforcement. ASIC’s substantial powers appear to act as a disincentive to establishing collaborative relationships with industry.
“The result is that ASIC seeks rectification/enforcement after a regulatory breach has occurred, as opposed to the prudential stance adopted by APRA.
“Given the degree of legislative change for Australian Financial Services and Australian Credit licensees, it would be helpful for licensees to have regular contact with an ASIC team akin to the APRA model for RSEs.
“The above differences in regulatory approach can be explained in part by the fact that APRA is a prudential regulator and ASIC is not.
"However, there is an argument that a move by ASIC down a path towards introducing a degree of staff specialisation may prove more effective and potentially more efficient than the current ‘first cab off the rank’ style approach.”
There will be those who read the ASFA submission to the Senate Committee and wonder whether Vamos has yet more to contribute as a regulator.
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