This week, the regulatory environment intensified as ASIC unleashed a torrent of enforcement actions and released its industry funding estimates, placing the costs of compliance and misconduct squarely in the spotlight. The fallout from major product failures continued, with the regulator now investigating the role of superannuation trustees. This crackdown occurred as the Reserve Bank of Australia (RBA) held the cash rate steady amidst ongoing economic uncertainty, and the industry grappled with the financial impact of the Compensation Scheme of Last Resort (CSLR).
The Australian Securities and Investments Commission (ASIC) demonstrated its enforcement resolve with a sweeping series of actions against non-compliant firms and individuals. The regulator permanently banned financial adviser Barry King for dishonest conduct and issued multiple other bans for misconduct, including to Kiriley Roper for fees-for-no-service and to advisers linked to the failed Shield Master Fund. ASIC also cancelled the AFS licences of two providers for failing to pay industry levies, reinforcing its stance on basic compliance. In a significant development, the regulator secured travel and asset freezing orders in its investigation into First Guardian and confirmed it is weighing up action against the superannuation trustees involved in both the Shield and First Guardian collapses.
Adding to the pressure, ASIC released its estimated industry funding levies for 2024-25. The levy for financial advisers is set at $46.2 million, while the cost for the superannuation and investment sector is projected to rise by over $5 million. This was compounded by news of a revised levy for the Compensation Scheme of Last Resort (CSLR), which, despite a $3 million reduction for the upcoming period, drew criticism from the FAAA for masking a “substantial deterioration” in the long-term funding outlook.
The Reserve Bank of Australia (RBA) opted to keep the cash rate on hold at 3.85% in its July meeting, citing persistent uncertainty in the economic outlook. RBA Governor Michele Bullock noted that while inflation has fallen significantly, the economic outlook remains uncertain, and the Board remains resolute in its determination to return inflation to target. The decision was not widely anticipated, though economists now believe a rate cut in the near future remains a “near certainty”.
On the consumer front, ASIC issued a public alert about “pushy” sales tactics being used to urge quick superannuation switches, warning consumers to be wary of high-pressure calls and unsolicited offers. The regulator also warned of scammers impersonating its websites to harvest personal information.
The political landscape saw former financial services minister Stephen Jones secure a new role as Deputy Head of Mission at the OECD in Paris, marking his departure from domestic politics.
Meanwhile, the industry continues to push for regulatory evolution. ASIC has launched consultations on proposals aimed at simplifying Product Disclosure Statements (PDS) and facilitating digital disclosure for financial products. The regulator is also proposing to remake legislative instruments related to financial reporting and disclosure relief for foreign securities.
However, challenges remain. The pass rate for the June financial adviser exam dropped to 57%, and advisers continue to report frustration with the ATO portal, with calls for better access to help with end-of-financial-year planning.
This week marks a clear escalation in regulatory accountability, shifting from policy debate to direct enforcement and cost imposition. The relentless pace of ASIC's banning orders and licence cancellations, particularly the new focus on super trustees in major failures, demonstrates a hardened supervisory stance consistent with themes from previous months. The release of industry levies crystallises the financial consequences of this environment. While past updates focused on the potential impact of the CSLR, this week brought concrete numbers, confirming the significant and ongoing cost burden for the sector.
Looking ahead, the industry must brace for continued regulatory scrutiny, particularly around product distribution and governance. ASIC's investigations into the enablers of product failures, now extending to trustees, signal a widening net. The upcoming consultations on disclosure provide an opportunity for the industry to shape a more efficient future, but this will unfold against a backdrop of non-negotiable enforcement and rising compliance costs.
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