Claire Wivell Plater | Jul 18, 2018 14:05
Originally published by Cuffelinks
Although recent ASIC enforcement action and the Royal Commission have predominantly focused on the financial advice and lending practices of AMP (AX:AMP) and the major banks, emerging patterns teach us that non-bank lenders and financial advice firms are the next targets.
How do we know this?
h2 ASIC’s approach/h2ASIC’s modus operandi is to first investigate potential regulatory issues within big targets, where misconduct is widespread and evidence is easy to find. This serves as a learning exercise, helping ASIC to ascertain the nature and scale of misconduct, and what to look for.
Investigation complete, ASIC generally releases a report on its findings and concerns. You’d expect that diligent compliance teams would read those reports, look within for similar problems, notify ASIC of any breaches and start a clean-up.
That’s what ASIC hopes for too. But, if no one falls on their sword – and the past few years have demonstrated how reluctant financial advice licensees are to do so – ASIC brings out the big guns of enforcement.
Naturally, they’ll start with the banks and big targets, who’ve proven easy to make examples of. But here’s the rub. By the time that work is nearing completion, ASIC has a template for investigating smaller players. They know what to look for, where to find it, what questions to ask, with a standard methodology.
h2 ASIC’s methodology/h2It goes like this:
So reading the tea leaves to be found in ASIC’s Enforcement Outcomes report for July-December 2017 and the carnage emerging from the Royal Commission, here’s a snapshot of what advisers and non-bank lenders should be looking for in their businesses. If they don’t, ASIC will!
h2 Concerns with non-bank advisers/h2The criticism that ASIC is receiving in the Royal Commission and the media for being a soft cop on the beat isn’t borne out when you look at the statistics. In the second half of 2017 alone, ASIC’s enforcement actions banned 54 people and companies from providing financial services or credit and instituted 232 summary prosecutions for liability offences and a further 17 sets of criminal proceedings. It raised $21.7 million in civil penalties and $94.4 million in compensation and remediation for investors and consumers.
If you’re not sure whether your business is at risk, or if you receive an ASIC notice, it’s best to get on the front foot.
Claire Wivell Plater of The Fold Legal is a leading financial services and credit lawyer. She actively advises both digital and ‘analogue’ businesses on commercial and regulatory issues and is a member of the Federal Treasurer’s Digital Advisory Group.
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