Stockbrokers next regulatory target
Stockbrokers have been identified as the next major target for scrutiny by the Australian Securities and Investments Commission (ASIC).
The Financial System Inquiry final report has pointing to the stockbroking sector as having flown under the radar with respect to the Future of Financial Advice (FOFA) changes and other recent scrutiny of the financial services industry.
"In recent years, ASIC has identified compliance issues in the stockbroking industry," its report said. "The Inquiry is aware of concerns with the prevalence of ‘grid' commissions for advisers, where commission-based remuneration is received soon after advice is given, with the potential to create a conflict of interest between the adviser and the consumer."
It said Australia and the United States were the only jurisdictions that used a grid commission structure and that in most other major financial centres, stockbrokers were paid a salary and discretionary bonus.
The inquiry report went on to say, "specific attention is required in the stockbroking sector in the immediate future".
"Unlike in the life insurance industry, a recent review of practices in stockbroking has not been undertaken. The Inquiry considers that ASIC should review current remuneration practices in stockbroking and advise Government on whether action is needed."
"The Inquiry believes that better aligning the interests of financial firms with consumer interests, combined with stronger and better resourced regulators with access to higher penalties, should lead to better consumer outcomes," it said.
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