Fees for no service compensation unfinished business: ASIC

Newly-minted ASIC chair James Shipton said there will be more consumer compensation to come over fees for no service financial advice.

Three months into his role, Shipton addressed the annual Australian Council of Superannuation Investors (ACSI) conference in Sydney this morning. He said the $220 million compensation bill for fees for no service will continue to rise.

The chair also reiterated ASIC is working towards delivering an accountability benchmark for the life insurance industry as well as new supervisory frameworks for the entire financial services sector.

So far he has found it disheartening and "jarring" that there are financial services organisations not co-operating with the law enforcement agency, and in some unacceptable cases, "they have actually obstructed our work."

"These firms have not just failed in their first line of duty, they have jeopardised the integrity of the entire regulatory structure," Shipton said.

"What's more they have endangered the financial system they are meant to support. This cannot stand."

Citing section 912a of the Corporations Act, he added that licenced firms "must take reasonable steps to ensure that its representatives comply with financial services laws."

He is seeing a gap between the statutory obligations to take reasonable steps and the expectations of ASIC and the wider community.

Since 2001, ASIC has helped ban more than 800 people from providing financial services or credit, and more than 390 people have been banned from being company directors.

"So far this financial year we have banned 100 people from providing financial services or credit and 40 directors of companies," Shipton said.

He added there have also been 19 criminal convictions in this financial year and 160 since 2011. ASIC has obtained $35.1 million in civil penalties in FY18; more than $230 million for consumers and $1.7 billion since 2011.

AustralianSuper chief executive and ACSI president Ian Silk opened the conference and added how asset owners are also feeling disheartened.

"When we see today that the Royal Commission appears to be the catalyst for just five financial organisations losing more than $30 billion in market value, that's at least $3 billion stripped from the retirement savings of the working men and women who are members of our superannuation funds," he said.

He sees investors, in particular superannuation funds, making significant and systematic contributions to rebuilding Australia's corporate reputation and credibility.

In 2017, 10 of the 13 companies ACSI targeted on gender diversity appointed their first woman director, Silk said.

"All 12 priority companies we targeted on remuneration improved their practices in line with shareholder expectations," he said.

But not surprisingly, public trust in Australian business has fallen and in some sections companies have damaged their social licence to operate, Silk added.

Read more: ASICACSIJames ShiptonIan SilkAustralianSuperAustralian Council of Superannuation InvestorsRoyal CommissionSydney
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