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New ASIC panel to be given power to ban brokers

by Reporter5 minute read

A consultation has launched to determine whether a new Financial Services Panel being set up by ASIC should be given the power to ban individuals from the financial services and credit industries for misconduct.

The idea for the panel initially came about following the Australian Securities & Investments Commission’s (ASIC) December 2015 Capability Review, which recommended that the financial services regulator “proactively develop opportunities to enhance the use of co-regulation for selected groups of the regulated population where this will deliver superior regulatory outcomes, including through strengthened licensing and registration regimes”.

Composition and responsibilities

The consultation paper, which was released yesterday, outlines that the Financial Services Panel (FSP) would sit alongside ASIC’s existing administrative processes and potentially comprise three people:

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  • financial services and credit industry participants; and/or
  • non-industry participants with relevant expertise (such as lawyers and academics); and
  • at least one ASIC staff member.

It aims to therefore “add a strong element of peer review to a subset of ASIC’s administrative decisions” and, potentially, “improve regulatory outcomes by ensuring that ASIC’s administrative decisions take into account current industry practices”.

While the FSP would make administrative decisions on certain matters relating to financial services and credit activities, the consultation paper outlines that it would initially be “responsible (in circumstances where the matter is referred to the panel) for determining whether ASIC will make a banning order against an individual for misconduct in the course of providing financial services and/or engaging in certain credit activities”.

Specifically, ASIC says the FSP would “consider banning orders for misconduct by financial services participants (excluding corporate AFS licensees) and participants in the credit industry”.

This would include mortgage brokers with Australian credit licences, or those authorised through a credit licensee.

However, the panel would not receive matters “where the grounds for making a banning order do not require giving the person the opportunity of a hearing”. Instead, the panel would be referred matters “where it is appropriate for peer review because of its significance, complexity or novelty”.

ASIC added that over time, the panel’s remit could be expanded.

The consultation paper does note that there are “potential disadvantages” to having a peer-based panel, including: inconsistencies in the decisions made; decisions “not aligning with ASIC policy”; decisions being made by people “who are less regularly engaged with the legal standards and concepts involved”; increasing costs “due to more people being involved in the decision-making process”; and “potential community concerns that the industry is judging itself”.

However, ASIC proposes mitigating these concerns by including an ASIC staff member on the panel who is “specialised and trained in making these types of decisions” and that the FSP only makes decisions “on a subset — rather than all — of ASIC’s administrative decisions”.

Stakeholders are being asked to respond to the consultation by 23 May 2017 to give their thoughts on:

  • how the panel would enhance the impact of ASIC's administrative decisions;
  • the types of matters that would be referred to the panel;
  • whether any additional administrative powers should be delegated to the panel; and
  • the optimal composition of the panel (i.e. whether it should include mortgage broking representatives).

“Significance of being judged by peers cannot be underestimated”

Speaking of the consultation, ASIC chairman Greg Medcraft said: “ASIC's aim in establishing a panel is to enhance the impact of ASIC's administrative decisions.

“The significance of being judged by peers cannot be underestimated. Peer review panels are a form of co-regulation in Australia and overseas.”

He added: “The panel will also bring broader experiences and perspectives into ASIC's decision making and ensure decisions reflect current industry practices and standards.”

[Related: 71% of consumers are happy with broker advice]

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