Embedded ASIC ‘officer’ would keep tabs on commissions

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    The government recently announced that it would give ASIC $70m to ensure the regulator has sufficient resources and power to combat misconduct in the financial services industry.

    From that sum, $8m is earmarked for “a new supervisory approach” that will see staff embedded in Australia’s five largest financial institutions (the big four banks and AMP) “to monitor governance and compliance actions”.

    The government announced this shortly after the Productivity Commission recommended deploying “principal integrity officers (PIO)” to keep tabs on all ADIs, specifically to minimise the risks of negative consumer outcomes arising from poorly aligned or conflicted remuneration structures.

    The PIO would also be in charge of evaluating the impact of integrated supply chains and whether they fulfil customers’ best interests. Their duties would seem them report directly to the ADIs’ boards as well as to ASIC if their advice was ignored, the Commission said.

    But how do you ensure it works?
    According to an article by Dennis Gentilin, an adjunct fellow at Macquarie University, for The Ethics Centre, in order for an integrity officer model to work effectively, the role must be properly established within the banks.

    “Amongst other things, this requires that the person occupying the role is truly independent and doesn’t feel a need to curry favour with people within the organisation. It requires the integrity officer is provided with unfettered access to the organisation so that they can identify where issues exist and whether people are reluctant to shine a light on them. And it requires that they are provided with the requisite platform and can speak truth to power,” he wrote.

    As the Productivity Commission stated in its report, “Many banks claim to put the customer first. A formal, accountable reporting line to both board and regulator would put substance to this marketing”.

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    Original Article