Academic canvasses extending DDO to personal advice

Applying a Design and Distribution Obligations (DDO) regime to financial advice and obliging the Australian Securities and Investments Commission (ASIC) to use its full arsenal of regulatory tools have been canvassed as ways of addressing the cost of the Compensation Scheme of Last Resort (CSLR).
The Senate Economics Committee review of the CSLR regime and Wealth Management companies has been told by NSW academic, Associated Professor, Marina Nehme that ASIC shadow shopping may also be a part of the answer.
Nehme, from the University of NSW, noted that personal advice had been excluded from the current DDO regime but suggested that extending the regime may be warranted.
“While it is important not to make the regulation burdensome … , applying DDOs for personal advice in the context of wealth management, especially in instances when the wealth management companies are targeting retail clients, would not be unreasonable as the entity would have had to compile the information needed for DDOs to be able to fulfil its best interest obligations under the law,” her submission said.
“Therefore, the burden is minimal on the business, and it will provide ASIC with a tool to assess the appropriateness of product being offered to that target retail audience.”
“From a regulated entity perspective, ASIC may start shadow shopping campaigns in that area to assess the practices occurring within wealth management companies,” Nehme said. “This is something ASIC has done in the past with financial advisers for example on an ad hoc basis. ASIC could implement such practice on more regular basis to understand deficit within the industry and built proactive strategies to deal with them.’
‘Minor breaches may be dealt with quickly using infringement notices. However, if a minor breach has a range of underlying causes one way to tackle it is for an enforceable undertaking to be entered into as this sanction can achieve two important results:
- Tackle the core of the problem
- Provide quick remedy to consumers for any losses they may have suffered.
“Enforceable undertaking provides the regulator with latitude to require that the regulated entity fulfils of a range of obligations that may improve the culture of the organisation.”
Nehme also suggested that where more egregious breaches or failures occurred ASIC could use of section 50 of the ASIC Act allowing it to bring civil action for recovery of damages for corporate misconduct.
No more damn academics. Your input is naive and totally clueless. The reason advice in this country is so expensive and almost unworkable is academic and bureaucratic numpties theoretically pontificating and insisting on layer upon layer of administrative burdens that don’t actually solve the problem.
Four things are required.
1. A professional standards board with a majority of present or past practitioners. The only people that really understand advice.
2. Apportion blame appropriately. When products fail hold the promoters appropriately liable.
3. Forbid product owners from employing advisers. This would include ‘qualified advisers’.
4. ASIC to get off their fat lazy backsides when concerns are raised. Storm concerns and reports to ASIC were years out from the final blow up. As was Dixon. How much additional suffering was created due to the ‘efficiency’ of public servants?
The system is broken, it doesn’t work. When will we try something different than the same stupid responses of the last 20 years?
Point 4 is spot on! The only ones who couldn’t see the Storm and now Dixons implosions coming were those who are paid to spot impending problems, ASIC- the ineffective regulator.
Pretty much the entire conga line of kneejerk regulatory changes imposed on the industry over the past 17 years – and the inevitable blowout in cost to serve- could have been avoided if we just had a good efficient regulator that understood and worked with the industry it oversees.
Where do these people come from??? And more importantly, how do they get to even put their drivel into the public arena. Surely there are some adults involved in these forums who have the backbone to give them a slap and stop wasting everyone’s time!
What an utterly clueless and irresponsible idea. This idiot is perpetuating the same mistakes as Hayne. Trying to fix advice problems by strangling advisers in ever more red tape. The real solution is obvious, and has been for a long while. BAN VERTICAL INTEGRATION.
Yes!! Hayne had the opportunity to ban VI but totally squandered this golden window of opportunity. The wrought continues…..
You won’t print what I want to say about this clueless academic!
Academic funded by asic and Treasury no doubt. Corrupt sick and flawed. What a rotten and narrow minded outcome. So many inquiries and half a decade of reviews have evidenced less regulation and choking red tape needed. Csolr wasn’t even costed by Government the burden should not be on diminishing over worked over taxed advisers. It should be on government less regulation and removing the csolr all together and making product providers pay. They should all be ashamed and disgusted
In my opinion, academic input into financial advice legislation and regulation, over many years, has delivered poor outcomes for the public and advice professionals alike.
I also believe that it is fair to suggest to academics that they need to better address the externalities of their recommendations with greater rigour. (i.e. cost).
Marina Nehme. Remember that name. If she ever tries to wangle her way onto any government inquiries or regulatory bodies she must be strongly opposed. Clearly she has no idea about reality, and will do much more harm than good for consumers.
Interesting. Ms Nehme is probably funded by ASIC. No, wait a minute, Initially funded by us via the ASIC levy.
According to the New South Wales Law Society website she has a doctorate on ASICs enforceable undertakings.
ASIC used to levy a lot of enforceable undertakings, but now that Advisers fund them via the ASIC levy, it is much easier for ASIC to launch litigation and damn the torpedoes.
And you don’t have to spend months negotiating terms with the target of the enforceable undertaking
On further reflection, as required by the principles behind FASEA, this is kite flying 101 by ASIC.
ASIC can see CSLR being modified against its principles by a combination of political pressure and the closeness of the next election.
So why not have a diversion?
” Hey, look over there, here’s an idea, which, incidentally, we swear is totally independent of ASIC”