FPA/IFSA voice concerns over growing ASIC powers

TheFinancial Planning Association(FPA) and theInvestment and Financial Services Association(IFSA) have hit out at the possible increased regulatory powers of theAustralian Securities and Investments Commission(ASIC) under the Financial Services Reform Act (FSRA) Amendment Bill 2003.

In submissions sent to a Senate Economics Committee inquiry over the Bill, the FPA made a broad attack on the possibility of the Federal Government bestowing new discretionary powers on ASIC, while IFSA raised concerns over new ‘stop order’ powers of the regulator on product disclosure statements.

Under the Bill, ASIC may have the power to use exemption and modification powers where the strict operation of the FSRA legislation may produce unintended or unreasonable results.

Outgoing FPA chief executive Ken Breakspear says this could be “quite sensitive” to financial planners in regard to ASIC’s possible power over the use of words like ‘independent’, ‘unbiased’ and ‘impartial’.

“The regulation-making power may well cover interpretation of these words, and could have a major impact on how planning businesses are able to position themselves,” Breakspear says.

He says that it may affect the marketing strategies of groups such as boutique financial planners, who may describe themselves as independent financial advisers.

Under the Bill, ASIC may also have the power to issue stop order notices if a PDS is not worded and presented in a “clear, concise and effective manner”.

IFSA’s submission says this power is intrinsically subjective, and suggests a dialogue between the regulator and an issuer should occur before enforcement action as drastic and potentially damaging as a stop order.

“I guess we make the point that the sanction should be proportionate to the breach,” IFSA chief executive Richard Gilbert says.

The FPA says the Government should be careful not to vest power in a statutory body more than necessary to ensure convenient administration and supervision.

However, the FPA and IFSA says they endorse the flexibility inherent in ASIC having power to prescribe regulations that impact on the financial services industry for better enforcement.