Top planning executives in ASIC’s FOFA sights

The Australian Securities and Investments Commission (ASIC) has signalled that it will be looking to the upper-most levels of management to take responsibility for any failings within financial planning organisations.

The message was made clear by ASIC deputy chairman, Peter Kell, in a column in today's The Australian Newspaper, in which he referred to compliance and the delivery of appropriate advice as being a cultural issue.

"Particularly in the case of financial services organisations, a compliance culture will be reflected in the quality of their advice," he wrote. "If the advice is poor and non-compliant, we would want to know why management had not been on the case. If non-compliance is tolerated, even implicitly, it is a strong sign the culture is weak."

Kell made clear that ASIC would be taking a facilitative approach as financial services organisations sought to come to terms with the new Future of Financial Advice (FOFA) regulatory regime, but indicated it would be taking few prisoners where it detected a poor compliance culture.

"In ASIC's investigations, if we see a poor compliance culture it may result in a much tougher regulatory response," he said. "For instance, in some cases a complete review of the business's risk management framework, including a cultural review, may be necessary. This can be costly and enormously time consuming.

"On the other hand, if it is obvious organisations have their house in order, and the breach was inadvertent or isolated, we can take a more measured approach to fixing the problem," Kell said.

On the broader question of the FOFA changes, Kell claimed that for most financial advisers, "FOFA is eminently fair and sensible. It is difficult for anyone to argue against rules that provide:

*A ban on conflicted remuneration including commissions and volume-based payments, and

*A duty for financial advisers to act in the best interest of clients.

"The theme is clear: the client's interests come first and those interests will be protected. A strong compliance culture is fundamental to achieving that," Kell said.