The Financial Services Council (FSC) says it is happy for the Australian Securities and Investments Commission (ASIC) to be empowered to “throw the book” at banks which offer inducements to business clients to move to bank-owned default superannuation funds.
The FSC said it was happy to back such an empowerment of ASIC because it did not believe the practice was widespread, if it actually occurred at all.
Giving evidence before the Senate Economics Committee inquiry into consumer protection in the banking, insurance and finance industry, FSC senior policy director, Blake Briggs, said the organisation was happy to support a strengthening of Section 68A of the Superannuation Industry (Supervision) Act to give ASIC increased powers to deal with such issues.
In doing so, Briggs strongly questioned the validity of ongoing allegations levelled against the banks by Industry Super Australia (ISA), pointing out that ISA was not a consumer group but “a lobby group for a part of the sector that is currently opposing competition”.
He claimed no evidence had been provided to back the ISA allegations but, despite this, ASIC and the Australian Prudential Regulation Authority (APRA) had undertaken a joint investigation of the four banking institutions that owned superannuation funds.
“As I understand it, they required them to review every adviser that had connections with both a corporate client and the bank. They found no actual evidence of inducements ever having been offered. In fact, they were quite complimentary in terms of the separation between the payments to someone required to win over banking business versus the remuneration of someone who provided superannuation services. There was a clear separation in those lines and no cross-incentivisation,” Briggs said.
He claimed that, in spite of this, the ISA had continued to levy accusations that it occurred.
“The reason we are calling for the strengthening of section 68A is that, to the extent that claims of this are occurring, if it ever did occur, the only remedy is for consumers themselves to bring an action against the institution that offers a superannuation product and had offered the inducement,” he said. “We think it would be appropriate for ASIC to also have the power to take action on behalf of those consumers.”
He said the FSC believed ASIC did not currently have such a power and that the amendment of 68A would give the regulator the power to have a financial penalty levied, should it ever be shown to occur.
“In short: if this happens, throw the book at them. But our members have been extensively crawled over by the regulator to try and find examples of this, and they have never found an example of it,” Briggs said.
