Australia's regulatory protection of investors is inferior to that offered by other jurisdictions and the chairman of the Australian Securities and Investments Commission (ASIC), Greg Medcraft is guilty of a laissez faire attitude, according to financial services commentator and co-founder of FinaMetrica, Paul Resnik.
Commenting on the recent release of the Senate Committee report into the performance of ASIC, Resnik said the Australian regulator had an important role in protecting consumers against bad financial advice and taking action against advisers where unsuitable advice is given.
"ASIC's attitude to date has been too hands-off, as the Senate enquiry noted. Only as recently as last week, the ASIC Chairman Greg Medcraft said ‘being a free enterprise person, I would rather people sort out the issues between themselves rather than involving ASIC,' referring to disputes between advisers and consumers.
"He [Medcraft] also indicated he was happy for the private sector to take actions against dodgy advisers via litigation funds or class actions, rather than ASIC itself," Resnik said "Such a laissez-faire attitude does little to instil consumers' confidence that their interests will be protected by the regulator."
He claimed that such an approach also did not reflect an appreciation of the power imbalance between advisory businesses, which were now largely owned by the big banks, and consumers, many of whom are retirees and more often than not, financially illiterate.
"What we are seeing today is the result of poor decisions made by successive governments," Resnik said. "Initially, when the Federal Government began shifting responsibility for retirement from themselves to the community, they created a demand for advice but left it to industry to satisfy that advice. In the early 1990s, ASIC chose to go down a disclosure path rather than a quality of advice route. Hence, amongst other things, the very low entry standards required for financial advisors."
"The Government is ultimately responsible for the legislative and regulatory framework. What we have seen from the industry and the regulator over the last 20 years is only what could have been expected given the framework set," he said.
