ASIC flags breach crack-down
The Australian Securities and Investments Commission (ASIC) has issued a further warning about poor culture within financial planning organisations and urged that remuneration incentives be based on good culture rather than sales.
The warning has come as the regulator has flagged a major review of breach reporting and an intention to more closely examine what it described as high risk licensees who may then face enforcement action.
ASIC deputy chairman, Peter Kell told a risk management conference that where the regulator saw "business models and incentive structures undermine a focus on better consumer outcomes we are likely to examine that organisation more closely"
"Lessons from the global financial crisis (GFC), and from ASIC's experience in administering and enforcing our financial services and markets law more broadly, tell us that culture matters. And it matters in very concrete ways — for example, in remuneration and incentive structures for employees, and in the way that products are designed and marketed," he said.
"If a licensee has a poor culture of compliance, there are likely to be breaches of the law. Poor culture also undermines customer trust and confidence in a licensee. Ultimately, this will impact the licensee's bottom line," Kell said. "More broadly, sector-wide cultural problems destroy consumer trust and confidence in the whole sector. And in the financial services sector we see clearly that the problems created by poor culture can have a very long tail due to the long-term nature of products and services."
He said this was an issue the financial planning industry was facing at the moment.
"At ASIC, where we see that business models and incentive structures undermine a focus on better consumer outcomes we are likely to examine that organisation more closely," Kell said. "… An organisation's culture will also affect what regulatory outcome we pursue. The poorer the culture, the stronger the action we are likely to take."
Recommended for you
The corporate regulator has cancelled the AFSL of a Perth advice firm with the firm having previously seen its licence temporarily suspended in 2020.
Having proposed changes earlier this year, ASIC has clarified how it will support licensees with additional relief under the reportable situations regime.
AMP has partnered with BlackRock and research house Lonsec to provide a model portfolio capability on its North platform that offers “portfolio customisation at scale” to advice practices of all sizes.
Money Management rounds up actions ASIC took against advice individuals in the first half for FY25 from exam falsifications to dishonest conduct.
