The Australian Securities and Investments Commission (ASIC) has admitted that its support for a one-stop-shop financial services external dispute resolution (EDR) scheme has resulted in it gaining increased powers.
ASIC’s submission to the Senate Economic References Committee review of the legislation setting up that the scheme, the Australian Financial Complaints Authority (AFCA), acknowledges that its power to guide outcomes is now backed by legislation, including issuing generation directions to AFCA.
ASIC has been a strong supporter of the one-stop-shop approach together with industry funding and its submission said the legislation underpinning AFCA had also provided the regulator with “new powers to issue general directions to AFCA “if ASIC considers that AFCA has not done all things reasonably practicable to ensure compliance with the mandatory requirements”.
It also noted that the legislation gives ASIC the power to specifically issue a direction to increase limits on the value of claims.
The submission noted that, in practice, the new powers would only be used “on an exceptional, last resort basis”.
“However, they provide an important new accountability measure that does not feature in the current co-regulator EDR framework,” it said. “Currently, if ASIC did have significant concerns about the operation of an approved EDR scheme, our primary regulator level is to revoke scheme approval. This is a blunt response which would have direct and likely disproportionate consequences for member firms and potential also for consumers.”
“It is arguably so blunt as to be illusory,” the submission said.
It said the proposed directions power provided ASIC “a more fit for purpose power that could be applied in a very targeted way”.