ASIC could soon have the power to direct brokers in the conduct of their business where necessary to address or prevent compliance failures, if recommended proposals are backed through a new consultation.
In its final report, the Financial System (Murray) Inquiry recommended that ASIC should have more power to impose conditions requiring licensees to address concerns about “serious or systemic non-compliance with licence obligations”.
According to the Enforcement Review Taskforce, ASIC’s existing powers to require licensees to adopt internal systems or to restrict their activities have three shortcomings. These are:
The taskforce went on to explain that particular difficulties arise where a licensee has taken some steps to rectify identified compliance concerns, but ASIC “remains concerned that those steps are not sufficient to ensure that there will not be further breaches by the licensee of its obligations or additional measures are required to ensure that the impact on clients or former clients is identified and, where necessary, remediated”.
It gave the example of a licensee or credit representative not establishing an “appropriate remediation program to assess whether compensation is payable to consumers” when a breach has occurred.
As such, a consultation has now launched on granting ASIC the power to “require compliance with AFS or credit licence obligations in real time, and that the regulator should be given powers to direct licensees to take or refrain from taking actions where appropriate for this purpose”.
The reforms, as listed below, are aimed at filling a gap in the existing licensing regimes:
Finally, the consultation proposes that ASIC should be able to apply to a court to enforce the direction and take administrative action if an AFS or credit licensee does not comply with directions.
Speaking of the proposals, the Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, said that the government is committed to ensuring that ASIC can respond effectively to address compliance failures within licensed financial services and credit businesses.
“The proposed directions power would allow ASIC to take steps to protect consumers by preventing harm before the damage is done,” Minister O’Dwyer said.
Interested stakeholders are invited to comment on the proposals in ASIC’s Directions Power paper before 20 November 2017.
The final report from the ASIC Enforcement Review Taskforce will be released at the end of this month.
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