Parliamentary inquiry

The Parliamentary Joint Committee on Corporations and Financial Services chaired by Mr Bernie Ripoll MP, conducted an inquiry into recent financial product company collapses, including Storm and Opes Prime.

The inquiry looked at the role played by financial advisers, the state of the general regulatory environment, remuneration models (such as commissions), the role of marketing and advertising in financial product distribution, the licensing arrangements of those who sold the financial products and services, and the consumer protection and insurance arrangements in place.

The Committee reported to Parliament on its findings on 23 November 2009.

The Committee made the following recommendations in its Report:

Recommendation 1

The committee recommends that the Corporations Act be amended to explicitly include a fiduciary duty for financial advisers operating under an AFSL, requiring them to place their clients' interests ahead of their own.

Recommendation 2

The committee recommends that the government ensure ASIC is appropriately resourced to perform effective risk-based surveillance of the advice provided by licensees and their authorised representatives. ASIC should also conduct financial advice shadow shopping exercises annually.

Recommendation 3

The committee recommends that the Corporations Act be amended to require advisers to disclose more prominently in marketing material restrictions on the advice they are able to provide consumers and any potential conflicts of interest.

Recommendation 4

The committee recommends that the government consult with and support industry in developing the most appropriate mechanism by which to cease payments from product manufacturers to financial advisers.

Recommendation 5

The committee recommends that the government consider the implications of making the cost of financial advice tax deductible for consumers as part of its response to the Treasury review into the tax system.

Recommendation 6

The committee recommends that section 920A of the Corporations Act be amended to provide extended powers for ASIC to ban individuals from the financial services industry.

Recommendation 7

The committee recommends that, as part of their licence conditions, ASIC require agribusiness MIS licensees to demonstrate they have sufficient working capital to meet current obligations.

Recommendation 8

The committee recommends that sections 913B and 915C of the Corporations Act be amended to allow ASIC to deny an application, or suspend or cancel a licence, where there is a reasonable belief that the licensee 'may not comply' with their obligations under the licence.

Recommendation 9

The committee recommends that ASIC immediately begin consultation with the financial services industry on the establishment of an independent, industry‑based professional standards board to oversee nomenclature, and competency and conduct standards for financial advisers.

Recommendation 10

The committee recommends that the government investigate the costs and benefits of different models of a statutory last resort compensation fund for investors.

Recommendation 11

The committee recommends that ASIC develop and deliver more effective education activities targeted to groups in the community who are likely to be seeking financial advice for the first time.

Read the Report of the Inquiry

Read ASIC's submission to the Inquiry (submitted on 18 August 2009)


Last updated: 27/01/2015 05:24