Fear must be a greater factor than greed in influencing better standards of behaviour in the financial services industry, according to Australian Securities and Investments Commission (ASIC) chairman, Greg Medcraft.
Addressing a Stockbrokers Conference in Sydney today, Medcraft emphasised the importance of the penalty regime overseen by the regulator.
“Penalties that are an effective deterrent against wrongdoing have a negative influence on conduct; they stop people from breaking the law,” he said. “For penalties to be an effective deterrent, the disincentive to break the law must be greater than the potential gain — the fear must be greater than the greed.”
Medcraft explained ASIC’s approach by saying that it targeted the fear side of this equation in terms of, firstly, the fear of getting caught.
“…ASIC’s law enforcement targets the consequences of getting caught. For these consequences to be an effective deterrent, we need penalties that inject so much fear it stops people from breaking the law. Tougher penalties for white collar crime will provide the right nudge so that fear can overcome greed,” he said.
