Meting out equal justice

Mike Taylor writes that ASIC is right to pursue managers with just as much vigour as it pursues financial planners when things go wrong. 

The Australian Securities and Investments Commission (ASIC) is on the right track when it suggests that ridding the financial planning industry of bad apples involves more than just tracking the movement of miscreant planners. 

When ASIC deputy chairman Peter Kell told a Money Management/Super Review Breakfast in Sydney that the regulator would also be looking to identify miscreant managers in efforts to eliminate the industry’s bad apples, he was certainly indicating that ASIC was on the right track. 

Why? Because a close examination of major and minor financial services mis-steps reveals they have been owed to more than just the actions of planners.

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In many instances, the action of managers represented a significant factor. Worse still, the actions of managers influenced the cultures which gave rise to the actions of planners. 

Any reading of the evidence presented to the Senate Committee reviewing the activities of ASIC reveals that culture was a significant factor in the enforceable undertaking which was imposed on Commonwealth Financial Planning – and, arguably, management-driven culture can be seen to have been a factor in other planning-related upsets.  

The problem for both the planning industry and ASIC is that while a number of planners found themselves being banned or absolutely rejected from the industry, their former managers have resurfaced in other financial services-related jobs, some of them with major institutions. 

But while ASIC has at least some capacity to generally track financial planners as they pursue their calling through the financial services industry, it is not as capable of tracking the movement of the managers of the organisations for whom those planners worked. 

Both Kell and his boss, ASIC chairman Greg Medcraft, have signaled their desire to see the establishment of a national register of authorised representatives capable of allowing the tracing of bad apples, but it was Kell who last week extended that proposition to cover managers and financial services executives. 

“We can ban advisers but find that those who manage advice move on to new businesses and new roles,” Kell said last week.

“If they are not involved with advice, we cannot ban them, even if they are involved in serious failings related to advice.” 

He said that for ASIC it would be better if it could ban those in management as well, where it could be established that there had been specific failures. 

The ASIC deputy chairman noted that the regulator was aware of a number of cases where management figures involved with failures had been able to take on new roles, while advisers had either been removed from the sector or placed under disciplinary action.  

Kell said that ASIC would continue to advocate for the power to pursue managers both in the context of the Senate Committee review and as part of its input to David Murray’s Financial Systems Review. 

Of course, ASIC’s desire to pursue managers begs the question of how far removed from the actual planning process they need to be before the regulator believes they should not be a part of its processes?

Should it stop at planning principals? Dealer group heads? Executive general managers within major banking divisions? 

It seems unlikely that many financial planners would be opposed to ASIC’s moves to pursue miscreant managers, and it seems unlikely that groups such as the Financial Planning Association or Association of Financial Advisers would wish to stand in the way of non-planner miscreants getting their just desserts.