The regulation of advisers in Australia is ridiculously complex and you could hardly blame the average person for not comprehending how the innards of the regulatory system connect together.
The ethics and standards body, FASEA, contributed to this complexity simply by existing. Its demise as a single entity is to be welcomed by all.
What happens next will be interesting to observers because some of the noises around the traps suggest that the government will not pursue a one stop shop model like it has with Tax Practitioners Board, which, by the way, is a model that it should adopt.
The reason for this should be clearly apparent to any keen observer of the regulation of professionals in this country.
Tax agents, BAS agents and financial planners that provide tax related advice are registered with the TPB and can lose their registration if they are found to have breached their obligations under the law.
The TPB sets the education requirements and also keeps a close eye on the way in which professional organisations regulate their members.
Complaints that are made to the TPB against an agent and found to have been justified are notified to a professional body for further action if required.
That system works and the fact the Federal Government did not look to replicate it earlier but rather create entities as bolt-on mechanisms to fill gaps is typical of regulation in the professional services space.
Remember Enron and that big global accounting brand, Arthur Andersen? The collapse of those two organisations triggered an overhaul of accounting regulation in the United States that included the creation of the Public Company Accounting Oversight Board.
The PCAOB took on the various roles related to inspecting audit firms and issuing standards after the audit profession copped a caning because of the controversies that fell out of Andersen.
It should be noted that Enron was not the only large corporate to find itself in accounting strife. That era also saw the collapse of WorldCom and Parmalat amongst others and caused a rethink of accounting regulation.
What did Australia do to keep up with its American cousin in regulation, the Securities and Exchange Commission?
ASIC introduced audit firm inspection processes to ensure American regulators were satisfied the Aussie equivalent was doing something. Audit independence monitoring was given to the Financial Reporting Council, which remains a mystery because auditor independence should have lived somewhere else all together and not on the FRC’s things to do.
Australia had to prove to the American regulatory system that it had functions that replicated the changing climate in the United States at the time.
Few things happened that would be seen as fundamentally shaking the audit world up in that respect.
Functions were bolted on and never properly reviewed. Even the recent committee that poked, prodded and prognosticated on matters of audit regulation did not recommend fundamental change to the standard setter structure.
Financial services consumers need the protection that is afforded by a one stop shop for the registration, monitoring and discipline of advisers. A single authority to deal with these issues. It