Richard Batten, partner and financial services legal specialist at Minter Ellison, recently spoke to Professional Planner magazine. He said that in making the transition towards professionalism, Australia’s financial planning sector needs to embrace more effective self-regulation.
He referred to the management of ‘bad apples’ within the industry that has seen the Australian Securities and Investment Commission’s (ASIC’s) budget significantly cut. ‘There is a risk, whenever a regulator starts questioning its ability to engage in enforcement — whether because of resources or the way it’s been criticised for its conduct or the way it’s been perceived — it reduces the risk of non-compliance,’ said Batten. ‘It’s a difficult issue. ASIC’s been obviously quite concerned about it, but there are limits around how far it has felt it can go in certain areas.’
He acknowledged that Australian financial services licence (AFSL) holders typically have a strong interest in this, but also accepted that ‘there may be concerns about the sharing of information between licensees, depending on whether it’s a competition issue or a defamation issue’.
Looking at an externally managed model of financial services industry regulation, he pointed out a key limitation of this approach. ‘There’s a strong interest to manage that process… but the only real solution in our current structure is for the misconduct to be drawn to the attention of ASIC, and for ASIC to issue a banning order,’ Batten said. ‘That’s the only true remedy that can actually be effective. There is a banning register. There is a remedy there.’
While emphasising the sensitivity of the issue of individual licensing of financial planners, which many believe would be a step back for the industry, Batten said this has re-emerged in some industry forums, but not in any sort of statutory sense. ‘We’ve made a deliberate decision as a country not to do individual licensing,’ he said. However, he suggests one or more of the financial planning industry’s professional associations may achieve a similar regulatory outcome.