Josh Frydenberg slams ASIC for enabling ‘culture of appalling conduct’

Federal Treasurer Josh Frydenberg has slammed the past failures of the corporate regulator and promised new powers to speedily compensate victims of misconduct.

Although awaiting the final recommendations of commissioner Kenneth Hayne’s banking royal commission, Mr Frydenberg said he was likely to give ASIC new powers, including the power of remediation that was included in a capability review handed down in 2016.

That means ASIC would be able to order companies who had wronged customers, such as AMP, to compensate them within a set timeframe, thus avoiding ASIC needing to take legal action.

“Australians affected by financial misconduct deserve timely remediation,” Mr Frydenberg told AFR Weekend.

Mr Frydenberg also committed to extending the royal commission if that is what commissioner Kenneth Hayne desired.
Mr Frydenberg also committed to extending the royal commission if that is what commissioner Kenneth Hayne desired.

David Geraghty

“A new ASIC remediation power as recommended by the ASIC Capability Review and accepted in principle by the government is one potential solution to ensure better and speedier consumer outcomes,” he said.

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Mr Frydenberg also committed to extending the royal commission if that is what commissioner Kenneth Hayne desired, and would be open to anything else he recommended when it comes to improving regulation.

“If he asks for a extension of time, we will obviously favourably consider that,” he said of the extension Labor has already called for.

ASIC criticised

With the commission due to hand its interim report to the government on September 30, and its final report in February, the new Treasurer fixed his sights on the past and multiple failures of the Australian Securities and Investments Commission under Labor-appointed chairman Greg Medcraft which enabled a culture of bad conduct to permeate the financial services sector.

Mr Frydenberg fixed his sights on the past and multiple failures of ASIC under Labor-appointed chairman Greg Medcraft ...
Mr Frydenberg fixed his sights on the past and multiple failures of ASIC under Labor-appointed chairman Greg Medcraft which enabled a culture of bad conduct to permeate the financial services sector.

James Alcock

“Appalling conduct and there is a case to answer now for ASIC, not the current chairman (James Shipton) who is new, but the question has to asked: If ASIC knew about this activity, this unlawful conduct, why didn’t they take action and why has this culture been allowed to permeate?” he said.

Mr Frydenberg listed some of the conduct so far unearthed by the royal commission, including banks and retail super funds charging fees for no service, the banks charging fees to dead people, alleged lying to regulators by AMP, and, as was heard this week, 300,000 alleged breaches by life insurers for providing unsolicited insurance advice, including selling a policy to a young man with Down syndrome.

On Thursday, ASIC came in for more criticism when the inquiry heard the regulator asked the Commonwealth Bank to donate $300,000 to charity rather than pursue an $8 million fine for misleading life insurance customers. It even allowed the bank to tone down a press release on the matter.

In the months when the government was fighting calls by Labor, the Greens and others to call a royal commission, it unveiled a series of measures designed to clean up the culture in the sector. This included boosting the powers and resources of the regulators and introducing increased civil and criminal penalties for breaches.

“Beefing up penalties is important because that means they carry a big stick, beefing up their resources means there can be no excuse not to follow these examples of misconduct and hold people to account,” Mr Frydenberg said.

But he made it clear that the government was ready to go further and would be responding to whatever commissioner Hayne recommended.

“I’m not pre-empting any finding from the royal commission but I think there’s a recognition among our regulators that this is a challenging time for them because they are clearly professional, well-intentioned people but these examples of misconduct have shocked the country.

“And I think people are demanding that there be no repeat.

“We have taken action on a number of fronts but there will be more to do and this is where the recommendations from the royal commission will be very important.

“We can’t rule in or rule out anything.”

Mr Frydenberg said he would also be open to suggestions from the regulators as to what further they needed to do their job.

The Treasurer said nothing from the royal commission had caused him to change his own personal circumstances. He already had an industry super fund.

“I’m like most Australians, I have super, I have a mortgage and a bank account and we’re a dual-income family,” he said.

Company tax cuts ruled out

In a broad-ranging interview, the Treasurer also ruled out revisiting company tax cuts for big business after the policy was dumped two days before the leadership spill last month. Mr Frydenberg said to help big business, the government would focus on a deregulation agenda similar to that in the US which seeks to streamline approvals processes and remove other red tape. This is at the same time the government is re-regulating the energy and banking sectors.

“The big focus for me is going to be on the productivity agenda, and the productivity agenda involves cutting regulation which is really important to business,” he said.

Otherwise, the government’s business focus would be on the small and medium enterprises which will include fast-tracking tax cuts that have already bee legislated for businesses with annual turnovers of up to $50 million.

The rate for these SMEs is currently 27.5 per cent and is not scheduled to drop to 25 percent until 2026-27. Two weeks ago, The Financial Review revealed the Turnbull government had already costed options, the preferred one being dropping the rate to 25 per cent by 2021-22, at a cost of $3.6 billion to the budget over the forward estimates.

“Our focus is on small and medium enterprises,” Mr Frydenberg said.

He stressed his other immediate role was to better promote the $144 billion in income tax cuts which will be rolled out in three stages over seven years. Labor opposes stages two and three for middle and high-income earners and will revoke them if elected.

“With taxes there is a clear line of distinction between us and Labor,” Mr Frydenberg said.

Similarly, Labor opposes dropping the company tax rate to 25 per cent for SMEs.

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