Purpose and cost of ASIC ‘name and shame’ regime challenged

The Australian Securities and Investments Commission (ASIC) should not be seeking to use the publication of internal dispute resolution and reportable situations data as a ‘name and shame’ tool to incentivise good behaviour, according to the Financial Advice Association of Australia (FAAA).

The FAAA has told ASIC that such an approach will “likely just disadvantage firms that are trying to do the right thing” at the same time as raising the cost of the exercise in the context of the already burdensome ASIC Industry Funding Levy.

As well, it said that ASIC should try to avoid publishing data that is too detailed and complex because it would likely confuse rather than inform consumers.

As well, the FAAA said it questioned the prospect of the data being used for competitive marketing purposes, given the reality that is not particularly reliable in terms of the of the underlying message.

“We are also concerned that it could be used to target the clients of licensees who demonstrate higher numbers of complaints and reportable situations and generate inappropriate concern and confusion,” the FAAA said in a response to an ASIC consultation paper on the publication of RS and IDR data.

“We strongly believe that any public-facing publication of data must consider consumers as the true end user of the information; and that the approach taken to publish such data must focus on the needs of the consumer and not the detailed data that is captured via the ASIC Portal or regulatory oversight of firms,” it said.

“We suggest that a large percentage of the data reported to ASIC by licensees will have little meaning for consumers and may in fact serve to confuse consumers and lead to misinterpretation of the data that could disadvantage firms.

“Data publication should be very selective and serve to fill a consumer need as stated by consumers, not as assumed would be helpful based on the depth of data that is available.

“Without a clear example of what the proposed publication would look like and how it would work for a consumer, there is too much data proposed for publication for consumers to make sense of. There is an excessive level of detail proposed for publication that will not assist consumers,” the FAAA said.

The FAAA said the RS regime is extremely complex and requires firms to seek legal advice to meet their reporting obligations, the expense of which in some cases may discourage firms from complying with the full requirements.

“ASIC’s overlay on the IDR obligations in the law has created very low thresholds for complaints reporting that captures matters resolved on the spot, including misunderstandings.’

“These are complex issues with the RS and IDR reporting regimes that have led to vast variations and inconsistencies in the data provided to ASIC. Until these underlying issues with both the IDR and RS reporting regimes are resolved, there is a risk that the publication of such data will disadvantage firms that are doing the right thing, including being more risk averse, and deliver little benefit for consumers.”

“The RS requirements must be amended to remove some of the reporting obligations (See below for recommendations regarding IDR data inputs). We are conscious that ASIC is proposing changes to the reportable situations regime that will reduce the number of matters that need to be reported and we question how this will be taken into account in terms of reporting historical data.”