On 26 June 2014, the Senate Economics References Committee (“Committee”) released its final report into the performance of the Australian Securities and Investments Commission (“ASIC”).

The Committee was tasked with investigating ASIC’s response to allegations of misconduct across the financial services industry and restoring public confidence in ASIC’s performance of its duties as the corporate regulator. 

The Committee focused on two case studies: consumer credit since 2002 and the allegations of serious misconduct by financial advisers at Commonwealth Financial Planning Limited (“CFPL”), part of the Commonwealth Bank of Australia Group (“CBA”). 

The report revealed that lending practices between 2002 and 2010 demonstrate inefficiencies in ASIC's ability to be proactive in recognising early warning signs.  The report was critical of ASIC in failing to hold the CBA to account, implying that ASIC’s inability to regulate and monitor the CBA severely undermined the performance of its corporate regulatory functions and diminished public confidence in its capacity.  The Committee remained unconvinced that the compensation process (which is ASIC sanctioned) will sufficiently compensate CFPL clients affected by these practices.

The report commented that the regulator was overburdened with tasks that do not assist its regulatory role (such as its registry functions), but needed to be more proactive and able to act promptly but fairly.  The report recommended that ASIC be altered to reflect changes in the financial sector and risks posed to consumers and required to employ personnel with sufficient skill and industry experience.  

The Committee made 61 recommendations (not all of which were supported by all members of the Committee), including:

  • establishing a Royal Commission to investigate serious misconduct by CFPL and the CBA;
  • a Government review of corporate insolvency laws and of ASIC to address current inefficiencies in its systems, practices and internal compliance; and
  • introducing higher standards for planners and compulsory professional association membership.

To view the report, click here.