ASIC’s Medcraft misguided on national exam

Calls by Australian Securities and Investments Commission (ASIC) chairman, Greg Medcraft, for a national adviser exam have been challenged by the Capital Markets Cooperative Research Centre (CMCRC) as likely to have little real impact and as being likely to generate a false sense of security.

CMCRC chief executive, Professor Michael Aitken said that while Medcraft's call was likely to be well-intentioned there was little evidence to suggest that an exam would increase trust and confidence in financial advice.

Further, he argued that ASIC had not yet fulfilled its own responsibilities with respect to defining appropriate operational measures.

Aitken suggested that a better approach would be to first determine whether introducing such an exam would make a positive difference and lead to positive outcomes.

"Personally I doubt whether the ability to pass an exam is going to have any impact on integrity-challenged individuals other than clearly telling them where the line they are not to cross actually is," he said. "I rather think such individuals are likely to ace such tests and provide investors with a false sense of security."

Aitken linked the proposal for the exam to the wider issue of regulators' inability to formulate clearly how the changes they regularly authorise to markets meet their mandate.

"ASIC has been making or authorising changes to the structure of financial markets for years without ever providing a procedure, let alone systematic evidence, on how those changes affect its objective of ensuring financial markets are ‘fair and efficient'. It boils down to accountability," he said

Aitken proposed that, as guardians of the markets' integrity and efficiency, ASIC needed to measure both fairness and efficiency, having first defined the terms ‘fair' and ‘efficient' and sought operational measures of each.