In its four-year corporate plan for 2017/18 to 2020/21, Asic outlined a number of projects designed to “align conduct in a market-based system with investor and consumer trust and confidence”.
The regulator said it will crack down on practices that pose the greatest risk to consumer confidence.
The focus of Asic’s surveillance activity into financial advice over the coming four years will be on remuneration, recruitment, training and whistleblowing policies.
“We continue to see poor culture driving poor conduct. For example, firms’ misaligned incentives, represented by conflicted remuneration structures, have negatively affected investor and consumer outcomes,” the plan said.
Emphasis on IFAs
In the financial advice space, Asic will continue with its surveillance into compliance within the biggest financial advice firms by monitoring their programmes for remediating consumers who received non-compliant advice, or in the case of fee-for-no-service breaches.
Last month, the market regulator reported a 288% jump in compensation for financial misconduct over the first six months of the year, compared to the same period last year.
Asic has also listed a number of projects focusing on markets, including a new project on compliance with continuous disclosure obligations, and implementing standards for listing complex exchange-traded products (ETPs).
Life insurance review
The watchdog also announced it will start a new project examining the effectiveness of the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2017, which was the life insurance remuneration reform passed by the Senate and became law on 9 February 2017.
“Product design and sales and distribution practices remain a concern to Asic. For example, culture and remuneration in the life insurance sector have affected consumer outcomes,” the gatekeeper said.
According to its corporate plan, Asic is currently implementing the processes for gathering data on life insurance policies, remuneration, lapse rates and clawback.
The review into the industry-led reform package will start on 1 January 2019.
Gatekeeper competence
The authority’s competence, governance and disclosure practices are all being considered as well as part of the plan.
“Gatekeepers play a critical role in managing these challenges and the overall health of the financial system. Their conduct – at the firm and industry level – affects investor and consumer trust and confidence.
“In this year’s corporate plan, we highlight the need to keep building people’s financial capability to support them in planning for their future; for gatekeepers, culture, incentives and deterrence continue to be factors driving behaviours in the sectors we regulate.”
