ASIC not expecting to enforce codes

Substantial doubt still surrounds how the various codes of conduct applying to the financial planning and insurance industries will be enforced, with the Australian Securities and Investments Commission (ASIC) making clear that while it may approve the codes it will not necessarily enforce them.

While ASIC officials have told the Parliamentary Joint Committee into Corporations and Financial Services that the regulator will not be responsible for enforcement, senior Treasury officials have told the same committee responsible for code enforcement, including those applying to insurance both inside and outside superannuation, may fall to the industry associations.

Specifically asked whether if a code was approved by ASIC, the regulator had the capacity to enforce the code, both ASIC deputy chairman, Peter Kell and senior executive, Michael Saadat, answered “no”.

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Kell told the committee that while the insurance industry had indicated its intention to submit their codes of conduct for ASIC approval, “that doesn't necessarily mean that ASIC would enforce all the provisions, but we would only approve it if we were confident that the enforceability was robust”.

Dealing with the question of enforceability, the ASIC deputy chairman then said: “If some of these codes are to have force, then making them mandatory is not a bad starting point”.

Questioned at the same committee public hearing, Treasury principal adviser, Retirement Income Policy Division, Ian Beckett Mr Beckett agreed that codes would be endorsed by ASIC but enforced by industry associations.

“… as it currently stands, it would be, presumably, endorsed by ASIC but it would apply to trustees who subscribe – and I guess it would operate on a contractual basis, rather than a statutory basis,” Beckett said in relation to the operation of the code of conduct likely to apply to insurance inside super.

Asked who would enforce the code, Beckett said it would be enforced by the relevant industry associations.

“They would agree to behave in a certain way, and I guess, if they didn't – from a consumer's perspective, their remedy would be to go to FOS [Financial Ombudsmen Service], to the Superannuation Complaints Tribunal (SCT) or, eventually, to the Australian Financial Complaints Authority (AFCA).

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