ASIC concedes FSI finding, argues for more power to be proactive

The Australian Securities and Investments Commission has conceded it is not doing enough to protect consumers and wants extra powers to get the job done.

ASIC deputy chairman Peter Kell said the organisation accepted the finding of the Financial System Inquiry that it needed to "take a more proactive approach in reducing the risk of significant detriment to consumers."

Speaking at the CIFR Financial System Inquiry workshop in Sydney this week, Kell said ASIC would need a controversial new power proposed by the FSI if it was going to step up.

The FSI recommended the introduction of a "product intervention power" that would allow ASIC to intervene without a demonstrated or suspected breach of the law.

This power would allow ASIC to require amendments to marketing and disclosure materials. The regulator could require consumer warnings and changes to labelling and terminology. It would also have the power to ban a product.

The power would be limited to interventions of 12 months.

The power could be used against an individual company or class of companies in relation to a product or class of products.

Currently, ASIC can only take action to rectify consumer detriment after a suspected breach of the law.

It can only take enforcement action against conduct causing consumer detriment on a company by company basis, even where the problem is industry-wide.

Kell said ASIC argued for the change because the new power would enable it to be more proactive, more timely and more targeted with its interventions.

"The FSI shows that we don't have the toolkit we need," he said.

The recommendation has been controversial, with some commentators arguing that it is too radical, especially the part that says ASIC should have the power to ban a product when there had been no breach of the law.

Kell said it was not right to say the power would be a radical departure. "The payday lending rules have product intervention provisions," he said.

"It is not all about banning products. There are lot of steps before you get to banning."

He said ASIC did not yet have a detailed model of what the power would cover but discussions were underway.

ASIC is also arguing for power to take action against managers and not just brokers or advisers. And it wants bigger penalties.