ASIC chairman James Shipton has slammed banks for creating “a trust deficit” after widespread unethical and unlawful conduct revealed at the financial services royal commission.
In one of his first public speeches since being appointed, Mr Shipton said the royal commission highlighted the “totally unacceptable and widespread practice” of charging fees where no advice was provided.
“The royal commission hearings have also highlighted unacceptably poor levels of self-identification, transparency and disclosure by the industry in identifying, reporting and dealing with misconduct,” Mr Shipton said in Sydney.
“All this goes to the heart of a trust deficit facing the financial services sector and, more broadly, corporate Australia.
“This failure of responsibility is jarring for me to observe as someone who prided himself on being a member of the finance profession.”
Speaking at the Australian Council of Superannuation Investors (ACSI) annual conference, Mr Shipton said the trust deficit was of the financial sector’s own making.
“My concern is that many people in finance have lost sight of the ultimate purpose of the financial system; they have forgotten that this system is about managing other people’s money,” Mr Shipton said.
“Instead of focusing on these functions, I worry that many financial services companies have become insular by focusing only on how they can maximise earnings.”
Mr Shipton’s criticisms come after revelations at the royal commission that the Commonwealth Bank charged fees to dead clients and that AMP and the big four banks charged fees for services not delivered.
ASIC boss warns against obstructing regulator
AMP has also been under fire for lying to ASIC as many as 20 times and that the AMP board made changes to a supposedly independent report to the regulator.
Without naming any institution directly, Mr Shipton hit out efforts to thwart ASIC’s efforts to uncover unlawful activity.
AMP cover-up claims scalps
AMP’s leaders have been dropping like flies after revelations the company repeatedly misled the corporate regulator.
“Unfortunately, all too often, the firms who have failed in their first line responsibilities have made matters worse by not cooperating with us and, in some unacceptable cases, actually obstructed our work,” Mr Shipton said.
“These firms have not just failed in their first line compliance duty, they have jeopardised the entire regulatory structure.
“What’s more they have endangered the financial system they are meant to support.”
Mr Shipton said obstructions “cannot stand” and that if the regulatory structure loses its integrity “our financial system is undermined”.
ASIC missing in action
ASIC is the law enforcement agency that shies away from enforcement, particularly at the top end of town, writes Ian Verrender.
ASIC itself has also been criticised for negotiating enforceable undertakings rather than always taking court action to seek larger penalties.
Mr Shipton also endorsed recommendations for the abolition of broker commissions to eliminate conflicts of interest.
James Shipton started as ASIC chairman on February 1, 2018, replacing Greg Medcraft who ran the organisation between 2011-2017.
Follow Peter Ryan on Twitter @Peter_F_Ryan.