The corporate watchdog has revealed that it will be paying “particular attention” to broker-introduced mortgages and keeping an eye out for fraudulent activity.
In its report on enforcement outcomes in the six months to June 2017, ASIC reported that 32 criminal charges had been laid, 57 investigations commenced and 80 investigations completed.
Twenty-three people have been removed from the financial services and $618.8 million paid in compensation and remediation.
Looking to the future, ASIC has pledged to focus on “enforcing higher standards in the financial services industry” in the six months to the end of 2017.
The commission said that it will focus on “what is expected of lenders in assessing loans (e.g., fraudulent loans) submitted by mortgage brokers, and what is required to meet the obligations for assessing and verifying the borrower’s financial circumstances”.
Further, ASIC will apply extra scrutiny to financial advisers’ compliance with their “obligation” to act in clients’ best interests, as well as their responsibility of providing “appropriate” advice to clients.
Additionally, the watchdog plans to examine “Australian financial services (AFS) licensees’ failure to deliver ongoing advice services to financial advice customers who are paying fees to receive those services” and “instances where AFS licensees claim to provide general advice to retail clients during the sale of financial products (and therefore do not need to comply with the best interests duty and related obligations) but are actually providing personal advice”.
Corporate governance will also be held to increased scrutiny. ASIC will focus on companies with poor corporate governance and “undisclosed associations and substantial holdings in shares in public companies”.
Past six months
Between 1 January and 30 June, 59 per cent of misconduct in the financial services was classed as credit misconduct, followed by other financial services misconduct (30 per cent) and dishonest conduct, misleading statements (8 per cent).
In corporate governance results, 40 per cent of misconduct was categorised as action against directors, followed by action against liquidators (30 per cent).
In the 2016–17 period, ASIC identified “gatekeeper culture” in markets, financial services and credit as areas of focus.
“We are focusing on culture and incentives that result in poor financial advice, irresponsible lending and mis-selling to retail investors and consumers, which can undermine trust and confidence in the financial system. . . . [and] we continue to focus on culture and incentives that drive poor conduct, which can undermine good governance practices and risk management systems and threaten market integrity.”
ASIC also turned its eye to digital disruption, cyber threats, cross-border services, transactions and businesses and the misalignment between the public’s understanding of financial products and the way in which those products are designed and marketed to them.
[Related: Former mortgage broker jailed for 8 years]