AIOFP MEMBER QUESTIONS RE ASIC CCU RESPONSE

Thank you for the attached correspondence and permission to distribute it to Members for comment. Below is a summary of their thoughts for your consideration, can you please respond to the questions

• By any measure, the current MIS/PDS process has been an unmitigated disaster for Consumers and Financial Advisers over the past 30 plus years, yet no Bureaucrat or Politician has proposed any significant changes to protect Consumers and Advisers from Financial Products failing. Please note Financial Advisers [Advisers] are also Consumers of Financial Products [Products].
• It is time ASIC acknowledged that if Advisers do not act in the best interests of their clients their business will fail. They want the best outcome for their clients but many Advisers have been caught with Product failure over the decades caused by the incompetence of other stakeholders ie Trustees, Manufacturers, Custodians, Auditors, Research Houses, Regulators.
• The failure of Products is the greatest source of Consumer losses over this period. Attached are the post 2006 losses, we expect the post 1991 losses will exceed $60 billion in aggregate, but very little has been done about it, it has been too easy for ASIC to attack the ‘low hanging fruit’ Advisers and not hold all other stakeholders to account.
• Under the PUBLIC GOVERNANCE, PERFORMANCE & ACCOUNTABILITY Act [PGPA Act] in sections 25 – 29, there are 5 general duties for Public Servants to follow and one is a DUTY OF CARE AND DILIGENCE to Consumers, surely the ongoing failure of the MIS/PDS process demands immediate attention to prevent Products failing?
• The AUSTRALIAN PUBLIC SERVICE [APS] Values and Code of Conduct sets core values including acting in the public interest of Consumers. Interestingly, there is no Best Interests duty similar to what is imposed onto Financial Advisers. We think it is time to align both Consumer and APS interests by imposing a Best Interests duty on Public Servants conduct, your thoughts?
• The recent AUSTRALIA PRODUCT SAFETY PLEDGE [APSP is administered by the ACCC] aims to protect Consumers from unsafe products online, why doesn’t ASIC put in place a similar protection for Consumers? Consumers are increasingly going online to invest, the recent Stirling First failure is a classic example.
• Your correspondence only mentions ASIC’s duty of care to Consumers once. Your response is dominated by reactive actions to Product Failure NOT proactive actions to preventing Product Failure happening in the first place? Proactive actions must be a far better outcome for Consumers…..
• The ASC protected itself in 1991/2 from potential litigation over Prospectus content but in the process ‘threw Consumers under a bus’ with totally inadequate ongoing protection from flawed Products. This is where the ‘all care and no responsibility’ criticism emanates from, are ASIC going to change their approach to Consumer protection with Product Failure?
• We believe Consumers DO NOT understand that ASIC DO NOT assess new PDS Products before market release over quality of the business model/Directors. They naturally think ‘ASIC’s approved this product’…. Under the new APSP and PGPA guidelines, considering Consumers are increasingly investing online, surely ASIC has a duty of care to assess and remove flawed products?
• When a Product fails ASIC immediately attacks the Advisers involved while the other parties who manufacture, manage, administer the product escape accountability. We are pleased that ASIC are now investigating the role of Administrators, Trustees, Custodians, Auditors and Research Houses play in the failure of Product, but talk is ‘cheap’ what actions are ASIC proposing to put in place?
• Can you please explain why the DIXON Advisers who were found guilty of not acting in the best interests of Consumers in the Supreme Court have not been banned by ASIC despite the Company being fined $7 million for their conduct? We asked your predecessor this question before retirement and received an evasive, inadequate response. Is it considered too late to impose sanctions of the Advisers involved?
• Also, can you please explain why the former DIXON Head of Advice is now in a senior position within the Department of Treasury with assessing Adviser conduct?
• We are aware of the difficult role ASIC plays in our Profession but Advisers need to have a more proactive role with policy and regulatory input to benefit Consumers and the Profession in general. We believe the existing intense ‘them and us’ attitude commenced in the post 1991/2 period when the flawed MIS regime created the need for a ‘scape goat’ to blame for Product Failure, it is time to bury that lamentable period from the past. We are not holding the current ASIC management responsible for this malaise, it has been developing over the long term.

Despite the reference to ‘Government’ in your correspondence, we think ASIC has a far greater role with policy development in conjunction with Government and other Canberra departments – our Profession needs ASIC’s support with issues like CSLR, LIF, banning of Vertical Integration and unnecessary compliance imposts to professionally service Consumers going forward.

As taxpaying Consumers who are also charged an ASIC servicing levy, we are requesting greater support, recognition and interaction to improve our Profession for all Consumers.

We look forward to your response in due course.