The major groups representing industry superannuation funds have backed increasing funding to the Australian Securities and Investments Commission (ASIC) to allow it to better regulate the financial planning industry.
The submissions of both Industry Super Australia (ISA) and the Australian Institute of Superannuation Trustees (AIST) have supported the increased funding to ASIC, with the AIST going so far as to lament the level of funding cuts imposed upon ASIC in the last Federal Budget.
The AIST submission directly referenced ASIC's seeming slow reaction to financial planning issues and stated, "AIST believes that in part ASIC's slowness to act has been caused by a lack of resources".
"AIST is therefore extremely concerned that the Federal Government is cutting funding to ASIC - $120 million over the next five years," it said. "The Federal Government has signalled that it wishes to reduce the regulation of the financial services sector (including superannuation). AIST emphasizes its earlier points that given the risks placed on consumers and the inherent structural conflict of interest in the non-separation of banks and wealth management, prescriptive legislation and a well-resourced regulator is essential to having a strong, sound, and well-functioning financial sector.
The submissions appear to substantially backed statement by the chairman of ASIC, Greg Medcraft, about the manner in which the level of budget resourcing has impacted the regulator's ability to pursue issues in the financial planning sector. Medcraft has also heavily canvassed a user-pays model for ASIC — something which is being actively considered by the Government.
While the industry superannuation funds lobby has strongly supported ASIC's funding arguments, ASIC has backed calls by the Financial Ombudsman Service (FOS) for a last resort compensation scheme.
The ASIC submission said professional indemnity (PI) insurance was "designed to protect AFS licensees against business risk, not to provide compensation directly to investors and financial consumers".
"Therefore, it has limitations as a consumer protection mechanism," it said.
The submission went on to say ASIC had suggested that an option to address relatively high levels of uncompensated loss was "a limited last resort statutory compensation scheme to supplement PI insurance".