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BFCSA: Criminality inside ASIC missed all the warning signs on Bankers 2002 onwards

Posted by on in ROYAL COMMISSION URGENT
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Transparency

7.27      One submitter noted that the financial service provider or bank involved in any serious systemic issue is not identified in any required quarterly reporting to ASIC or named publicly. He argued that 'consumer information fundamental to the protection of consumer rights is purposely withheld from every member of the public'.[40] Likewise, Mr Peter Mair observed that while FOS's determinations are published, it does not identify institutions at fault. He stated further that apparently FOS is able to order refunds only to the policyholders that complain personally and 'does not make any open public comment on the character of malpractices it discovers'. In his assessment—'a reticence that protects the secrecy'.[41]

7.28      It should be noted that ASIC requires the EDR schemes' complaints and disputes handling and other procedures to accord with the principles of natural justice.[42] COSL noted:

To ensure parties to a complaint are accorded procedural fairness, we provide written reasons for any decision we make about the merits of a complaint and provide the parties with a reasonable opportunity to respond to our decision...........

Conclusion

7.87      This one case study of problems in consumer credit between 2002 and 2010 (when the new credit laws came into force) sets the groundwork for the report. It introduces a number of key issues that surface and resurface in different contexts throughout this work. They include:

  • ASIC has limited powers and resources but even so appears to miss or ignore early warning signs of corporate wrongdoing or troubling trends that pose a risk to consumers;
  • the financial services industry is dynamic with new products and business models regularly emerging, which requires ASIC to be alert to the changes and any risk they pose to consumers or investors;
  • in this changing environment, there are always people looking to find ways to circumvent the law—ASIC needs to have the skills and industry experience to be able to match their ingenuity;
  • consumers trust their advisers, brokers and financial institutions to do the right thing by them to the extent that they may sign incomplete or blank documents, do not ask questions and do not seek second opinions—importantly such trust is open to abuse;
  • consumers have unrealistic expectations of what ASIC can do and the extent to which the regulator is able to protect their interests or investigate their complaints;
  • ASIC's communication with retail investors and consumers needs to improve significantly;
  • the important role other participants in the financial services industry can have in assisting ASIC in its regulatory role, which then allows the regulator to concentrate its limited resources on serious and systemic matters; and
  • some advisers or brokers targeting, deliberately and systematically, the more vulnerable members of the community, especially older Australians with assets but without high levels of financial literacy.

7.88      In the following chapters, the committee considers in depth another case study—the Commonwealth Financial Planning Limited matter—which elaborates on some of the issues already raised but in a different context.

 
 
Attachments area
 
Preview attachment ASIC Final Report Chapter 7 FOS & COSL.pdf
 
 
ASIC Final Report Chapter 7 FOS & COSL.pdf
 
 
 
 
 
 
 
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Guest Thursday, 23 January 2020