ASIC urged to get proactive on AFSL breaches
The Australian Securities and Investments Commission (ASIC) should be more proactive in utilising its powers in circumstances where the evidence suggests the regulator has acted against planners reactively rather than proactively, according to the CPA Australia.
The accountancy body has used a submission to the Joint Parliamentary Committee on Corporations and Financial Services to point to the fact that actions initiated against planners involved in Westpoint investments had occurred after the collapse.
Pointing to the problems surrounding the collapse of Storm Financial, the submission said it was clear ASIC had the power to investigate and enforce planner obligations with respect to client circumstances and appropriate advice and had previously banned a number of individuals for failing to comply with the Act.
However, it noted that all the bannings which had flowed from the Westpoint collapse had been conducted after the event.
“This perhaps indicates that ASIC currently appears to employ a reactive rather than a proactive approach to enforcing the regulation,” the submission said. “It is possible, however, that ASIC could use information that it receives as part of an application for an AFSL [Australian Financial Services Licence] to take a more proactive approach to its surveillance.”
The CPA submission said while it was not ASIC’s role or responsibility to approve a business model in order to approve an application for an AFSL, the regulator could use the so-called business description core proof provided by applicants to evaluate the risk that an application might breach their obligations once licensed.
“Any applicant who is deemed to be at risk could be reviewed by ASIC within a 12-month period of being granted an AFSL,” the submission said. “This review should include ensuring all relevant processes and licence requirements are still in place and review a random selection of Statements of Advice.”
It said this would aid in identifying whether the licensee was fulfilling its obligations with respect to client circumstances and appropriate advice.
AUTHOR
Mike Taylor
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