ASIC wants remuneration intervention capability
The Australian Securities and Investments Commission (ASIC) has lamented the fact that its proposed product intervention power will not include an ability to deal with “problematic remuneration arrangements” within licensees and elsewhere.
ASIC deputy chairman, Peter Kell has told Senate Estimates that the regulator sees this limitation as significant.
Discussing the limitations, Kell said perhaps the most significant one from ASIC’s perspective was the fact the power “does not envisage that, as part of the scope of interventions that would be allowed, the regulator would be able to take action in regard to problematic remuneration arrangements”.
“We think that that is a significant limitation when you consider that many of the most damaging problems and market failures that have arisen in financial services have arisen because of conflicts of interest and other poorly designed and misaligned incentives that generate adverse outcomes,” the ASIC deputy chairman said.
He said including remuneration under the intervention power “would be something that would at times allow us to, if you like, approach the problem by way of changing the way a product is sold, rather than necessarily changing the product itself, to ensure that it actually gets to the people that understand it rather than being sold to people who do not have an understanding of what they are getting, because of the wrong sort of incentive”.
“That is probably the main area where we think the model that has been out there could be improved,” Kell said.
The ASIC deputy chairman noted that the regulator also had concerns about the need to include other products under the intervention power such funeral insurance and small business loans.
“The other area where we think there is a reason to at least open the debate is around the time frame that is envisaged for the intervention,” he said. “It is 18 months without an ability to extend, and we think in some instances it would be useful to have an intervention extend beyond 18 months, or have the ability to do that.”
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