Will proactive regulation lead to ASIC litigation?
Regulators such as the Australian Securities and Investments Commission (ASIC) face the probability of litigation if they move to be too proactive about dealing with financial services companies they believe might be breaching the rules.
That was the warning issued by Mercer client management leader Steve Schubert, who told a roundtable this week that while he understood the reasons why people wanted the regulator to be more proactive in preventing losses such as those associated with Storm Financial and Trio/Astarra, this was not as easy as it seemed.
Participating in the roundtable conducted by Money Management sister publication Super Review and sponsored by CommInsure, he said it was often too difficult to determine when a failure was going to occur, particularly when those concerned appeared to be playing by the rules.
“When the train comes off the rails and the carriages are upside down you can say that’s a train wreck,” Schubert said. “But when the train is coming around a bend and just shaking a little you’ll get a difference of view - is it a train wreck or just a wobble on the rail?
“These things always look quite different from behind, so from ASIC’s point of view if they go into businesses and threaten to close businesses down when those businesses have invested a lot in the products they are selling, those people are going to take them to court over that,” he said.
Vision Super chief executive Peter Rowe agreed with Schubert, saying he believed the regulators were in the vexed position of being damned if they stepped in early and damned if they stepped in late.
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