Call for power to ban ‘unfit’ financial services bosses

The corporate watchdog should be given stronger powers to ban senior financial services managers and directors who oversee serious breaches of the law, an official review suggests.
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As part of a push to promote greater accountability in finance, the n Securities and Investments Commission Enforcement Review Taskforce has argued the regulator lacks the power to ban some senior managers or directors who are “unfit” for their role.

The gap in its legal powers has meant that some banned financial advisers continue to work in the industry as managers, potentially putting customers at risk, a consultation paper says.

It may also mean senior managers who oversee repeated breaches of the law are able to move within the industry without being punished, the paper said.

In response, the paper argued there was a need for ASIC to have powers to take action against senior managers or directors who have overseen businesss that have had “serious systemic compliance failures”.

“The government and the community are demanding better from those who occupy senior roles in banks, and the financial services sector generally,” financial services minister Kelly O’Dwyer said.

Such changes would beef up ASIC’s powers at the same time as the n Prudential Regulation Authority will also get greater power to ban senior managers and intervene in how top executives of banks are paid.

After a run of scandals in financial services in recent years, the government has appointed the ASIC Enforcement Review Taskforce to give the watchdog stronger powers when policing the sector.

Under current rules, ASIC can ban someone from providing financial services, but not from acting in a managerial position in the sector.

Nor can ASIC ban a director or manager “who may not have breached financial services laws but were nonetheless integral to the operation of the business,” the paper said.

ASIC can ban directors or managers who knowingly broke the law, but the paper said said there was a “residual concern” over its powers to take action against managers who “were responsible for the relevant business and failed to ensure that it was conducted in a lawful manner”.

The paper provided a case study in which ASIC identified “widespread breaches” of the law from a “large” licensee, and it accepted an enforceable undertaking.

The case study said ASIC had concerns about several senior managers within the firm, including a manager dubbed “Mr G,” who was later involved in further management failings at another firm.

“Despite the fact that Mr G appears to be involved in management failings at a number of licensees, ASIC is unable to ban him from managing financial services providers,” the case study said.

In response, the paper proposes the circumstances in which it can ban people to should be broadened, to expressly cover directors, company officers and managers.

It should be able to ban these people if ASIC has reason to believe they are “not a fit and proper person to provide a financial service”, the paper said.

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