Final Report

Performance of the Australian Securities and Investments Commission

26 June 2014

© Commonwealth of Australia 2014
ISBN 978-1-76010-037-7

View the report as a single document - (PDF 7488KB)


View the report as separate downloadable parts:

Senate Economics References Committee (PDF 16KB)
Abbreviations (PDF 16KB)
Executive summary (PDF 110KB)
List of recommendations (PDF 290KB)
PART I -  Introduction and background
Chapter 1 - Introduction (PDF 111KB)

Conduct of the inquiry
Background to the inquiry
Submissions
Scope and structure of the report
Acknowledgements

Chapter 2 - ASIC's role in context (PDF 489KB)

Relative size and growth of the financial services industry
Expansion in retail investors
Overall significance of Australia's capital markets
Overall significance of large financial sector firms to the Australian economy
Indications of where Australia's financial sector is headed

Chapter 3 - Overview of ASIC (PDF 648KB)

ASIC's statutory objectives and functions
Powers available to ASIC
Governance and organisational structure
ASIC's resources

Chapter 4 - Regulatory theories and their application to ASIC (PDF 325KB)

Fundamentals of regulation
Responsive regulation
Risk‑based regulation
Formalising the role of non-state bodies: strategies of co‑regulation and enrolment
Effectiveness of the regulatory regime and ASIC's regulatory approach

PART II - Overview of Part II (PDF 7KB)
Chapter 5 - ASIC's role and credit providers (PDF 248KB)

Early indications of irresponsible lending practices
ASIC's response to lending practices
ASIC's role and limitations
Individual complaints and ASIC's responsibility
Conclusion

Chapter 6 - New credit laws (PDF 143KB)

Background
Need for reform
New credit laws
Conclusion

Chapter 7 - Financial Ombudsman Service and the Credit Ombudsman Service (PDF 307KB)

Background
Criticisms of FOS and COSL
Accountability and performance
Jurisdiction, compensation and limitations
Financial Ombudsman Service—recommendations and determinations
Conclusion

Chapter 8 - Commonwealth Financial Planning Limited: What went wrong at CFPL and why? (PDF 177KB)

Chronological overview
The misconduct of individual CFPL financial advisers
CFPL's sales-based culture
Allegations of forgery
Don Nguyen's promotion and allegations of a management 'cover up'
CBA's actions between Mr Nguyen's promotion and his forced resignation
CBA's characterisation of misconduct at CFPL as 'inappropriate advice'
Pain and suffering resulting from the CFPL case
Committee view

Chapter 9 - Commonwealth Financial Planning Limited: ASIC's investigations of misconduct at CFPL (PDF 205KB)

The 2007–08 surveillance project
The Continuous Improvement Compliance Program
Failure of the CICP to prompt the necessary change at CFPL
ASIC's handling of reports of misconduct at CFPL
Committee view

Chapter 10 - Commonwealth Financial Planning Limited: ASIC's enforcement action (PDF 137KB)

Adequacy of ASIC's enforcement actions against individual advisers
The enforceable undertaking and change at CFPL
Committee view

Chapter 11 - Commonwealth Financial Planning Limited: The file reconstruction and compensation process (PDF 176KB)

Summary of the file reconstruction and compensation process
Criticisms of the file reconstruction and compensation process
CBA's response to criticism regarding file reconstruction and compensation
ASIC's evidence on file reconstruction and compensation

Chapter 12 - Commonwealth Financial Planning Limited: Recent developments and committee conclusions (PDF 115KB)

Developments in May 2014
Committee view

Chapter 13 - Internal control systems (PDF 193KB)

Compliance
ASIC's response
ASX corporate governance principle 3

PART III - Overview of Part III (PDF 8KB)
Chapter 14 - Corporate whistleblowing: ASIC's performance and issues with the current protections (PDF 223KB)

Why is whistleblowing important?
Whistleblower protections in the Corporations Act
ASIC's role in relation to whistleblowers
The need for whistleblower reform
Public Interest Disclosure Act 2013
ASIC's revised approach to handling whistleblower disclosures
ASIC's recommended options for legislative and regulatory change
Other potential areas for reform

Chapter 15 - Early intervention (PDF 179KB)

Managing complaints and receiving reports of corporate wrongdoing
Evidence before this committee
Individual experiences
Reports from industry professionals

Chapter 16 - ASIC's response to reports or other indications of wrongdoing (PDF 139KB)

Power to investigate
ASIC's complaints management process
ASIC's investigative capabilities
Conclusion

Chapter 17 - ASIC's enforcement decisions (PDF 325KB)

ASIC's overall enforcement record
Overview of ASIC's enforcement toolbox and criteria for taking action
General observations about ASIC's approach to enforcement
Does ASIC take on the 'big end of town'?
Enforceable undertakings
Factors that may discourage ASIC from taking court action
Committee view

Chapter 18 - ASIC's handling of enforcement matters (PDF 211KB)

ASIC's use of publicity
ASIC as a model litigant
Use of expert witnesses
Staffing and organisational structure issues

PART IV - Overview of Part IV (PDF 7KB)
Chapter 19 - ASIC's performance: the perspective of key stakeholders (PDF 160KB)

Overall views on working with ASIC
Processes for consultation and engagement
Collaboration and whether there should be greater co‑regulation
Industry secondments
Committee view

Chapter 20 - Community expectations and financial literacy (PDF 144KB)

Expectation gap
Licensed financial services providers, credit providers and registered companies
Financial literacy
Consumer Advisory Panel

Chapter 21 - Communication and complaints management (PDF 247KB)

Timeliness
Clarity in response
Tone of communication
Other concerns
Standards for handling misconduct reports and complaints
Assessment of ASIC's processes
Committee view

Chapter 22 - Service delivery and access to information (PDF 194KB)

ASIC's registries and client services
Access to information collected by ASIC
ASIC's websites

PART V - Overview of Part V (PDF 7KB)
Chapter 23 - Options for encouraging better enforcement outcomes (PDF 164KB)

Civil and criminal penalties
Addressing overlaps in jurisdiction and improving the working relationship with other enforcement agencies
Committee view

Chapter 24 - Financial advisers and planners (PDF 171KB)

Proposal for a national financial adviser examination
Reference checking and employee adviser register
Recognition of financial advisers and planners
ASIC's licensing tests
Banning and disqualification
Committee view

Chapter 25 - ASIC's responsibilities and funding: problems with the current framework and suggested changes (PDF 580KB)

Is ASIC overburdened and underfunded?
How do ASIC's responsibilities compare with foreign regulators?
Should ASIC lose some of its functions?
Proposal for a user-pays funding model
Committee view

Chapter 26 - Accountability and governance structure (PDF 217KB)

ASIC's lines of accountability
Views on the current accountability framework
ASIC's governance structure
Conclusion and recommendation

Chapter 27 - Unresolved matters (PDF 220KB)

Unsafe financial products
Insolvency laws
Boiler room scams

Chapter 28 - Concluding comments (PDF 85KB)
Additional Comments (Dissenting Report) by Deputy Chair, Senator David Bushby (PDF 109KB)

General recommendations surrounding the operation of ASIC
Cost recovery charging by ASIC
Whistleblower protections
Further Inquiry, Judicial Inquiry or Royal Commission

Additional Comments by the Australian Greens (PDF 145KB)
Appendix 1 - Submissions received (PDF 59KB)
Appendix 2 - Tabled documents and additional information received (PDF 11KB)
Appendix 3 - Public hearings and witnesses (PDF 13KB)
Appendix 4 - Timeline of ASIC's changing responsibilities (PDF 12KB)
Appendix 5 - Key enforcement matters (PDF 199KB)
References (PDF 224KB)

For further information, contact:

Committee Secretary
Senate Economics References Committee
PO Box 6100
Parliament House
Canberra ACT 2600
Australia

Phone: +61 2 6277 3540
Fax: +61 2 6277 5719
Email: economics.sen@aph.gov.au

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