Senate report calls for adviser banning powers and increased penalties

The Australian Securities and Investments Commission (ASIC) should be given the power to immediately suspend financial planners who it suspects have engaged in misconduct according to recommendations from the Senate Committee reviewing the performance of ASIC.

In its report the Senate Economics References Committee also stated that penalties for misconduct, including enforceable undertakings, should be increased and a government inquiry called to investigate the consistency of the civil and criminal penalties available to ASIC.

Under its recommendations relating to bans within financial services the report stated that any suspension of an adviser would have to be subject to the principles of natural justice and that any banned person could not continue to work in financial services as a director, manager or person of influence.

Recommendations from the Senate Economics References Committee Report into the Performance of the Australian Securities and Investments Commission

Bannings:

Recommendation 47 - The committee recommends that the government consider the banning provisions in the licence regimes with a view to ensuring that a banned person cannot be a director, manager or hold a position of influence in a company providing a financial service or credit business.

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Recommendation 48 - The committee recommends that the government consider legislative amendments that would give ASIC the power to immediately suspend a financial adviser or planner when ASIC suspects that the adviser or planner has engaged in egregious misconduct causing widespread harm to clients, subject to the principles of natural justice.

Penalties:

Recommendation 9 - The committee recommends that the government consider increased penalties and alternatives to court action, such as infringement notices, for Australian financial services licensees that fail to lodge reports of significant breaches to ASIC within the required time.

Recommendation 24 - As enforceable undertakings can be used as an alternative to court proceedings, the committee recommends that when considering whether to accept an enforceable undertaking, ASIC:

• require stronger terms, particularly regarding the remedial action that should be taken to ensure that compliance with these terms can be enforced in court;
• require a clearer acknowledgement in the undertaking of what the misconduct was;
• as its default position, require that an independent expert be appointed to supervise the implementation of the terms of the undertaking; and
• consider ways to make the monitoring of ongoing compliance with the undertaking more transparent, such as requiring that reports on the progress of achieving the undertaking's objectives are, to the extent possible, made public.

Recommendation 41 - The committee recommends that the government commission an inquiry into the current criminal and civil penalties available across the legislation ASIC administers. The inquiry should consider:

• the consistency of criminal penalties, and whether some comparable offences currently attract inconsistent penalties;
• the range of civil penalty provisions available in the legislation ASIC administers and whether they are consistent with other civil penalties for corporations; and
• the level of civil penalty amounts, and whether the legislation should provide for the removal of any financial benefit.

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