In his opening statement to the Parliamentary Joint Committee on Corporations and Financial Services, new ASIC chair James Shipton seemed to question whether the misconduct identified by the Royal Commission has prompted any real behavioural change.
If that sentiment sounds somewhat nihilistic, it's worth noting that, according to Shipton, "whilst we are hearing important acknowledgements from leaders of financial institutions about change, such change is not happening as quickly as it should."
Are financial institutions using delay tactics?
He said ASIC is still experiencing "slow and delayed responses from financial institutions and, in some cases, overly technical responses aimed at delay."
"Due process is important," he added, "but it must not be manipulated to disrupt the achievement of fair, appropriate and honest outcomes."
The speech also touched on how the Commission's interim report suggested "ASIC is expected to utilise enforcement tools more often, particularly against larger financial institutions because, as the interim report highlights, 'important deterrents to misconduct are… missing.'"
"The missing market deterrents include meaningful competitive pressures," he continued, "fear of failure or collapse of the institution and fear of failure of individual financial transactions. The absence of these deterrents means that there are limited market cleansing mechanisms to counter misconduct."
Does ASIC need to be “bigger”?
This led to Shipton questioning whether ASIC is "right-sized," emphasising this wasn't a demand for further funding.
"Such a question needs context," he said, adding: "For me, my own experience as a regulator in Hong Kong, in a system that also has an industry funding model, is instructive.
“There, on an adjusted basis (in terms of financial services GDP and financial services population), Hong Kong’s financial regulators are three times the size of Australia’s."
The steps for real change
I don’t think anyone ever expected the Royal Commission to completely solve the problem of misconduct in Australia’s financial services industry, but Shipton’s observations do highlight that change needs to take place from the ground up.
Do you think the Royal Commission will help to curb misconduct? Comment and let us know your thoughts.
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