Inside ASIC

ASIC View Episode 9: Deputy Chair Peter Kell on investment scams

During Consumer Fraud Week 2016, the Australian Securities and Investments Commission is warning consumers and investors to 'Wise Up to Scams' and do some simple checks before they part with their money.

ASIC Deputy Chair Peter Kell joins the podcast to talk about how investment scams work, and how best to identify and avoid them.

Read ASIC's media release on Consumer Fraud Week 2016 and visit ASIC's MoneySmart website for more tips on avoiding investment scams.

Read the transcript

ASIC View Episode 8: Commissioner Cathie Armour on ASIC's insider trading work

On the latest episode of ASIC View, ASIC Commissioner Cathie Armour discusses ASIC's work in insider trading matters. Topics discussed include the damage done by insider trading, ASIC's surveillance and enforcement strategies and other related key areas of interest.

Media releases for matters mentioned during the podcast:

- Mr Xiao/Hanlong mining

- Kamay and Hill

ASIC View Episode 7: ASIC Forum robo-advice session

The following is an excerpt from a session at ASIC's 2016 Annual Forum on robo-advice. The session covers:

• How does robo-advice sit alongside traditional financial advice?
• Where does robo-advice cause the most disruption?
• How does the current regulatory framework apply to robo-advice?
• What are the issues that are unique to robo-advice?
• The podcast also discusses ASIC's Consultation Paper 254 Regulating digital financial advice (CP 254) and draft Regulatory Guide 000 Providing digital financial product advice to retail clients.

Speakers include ASIC's Joanna Bird and Louise Macaulay, Senior Executive Leaders of the Financial Advisers team as well as a panel discussion from:

Greg Miller, Executive General Manager, Wealth Advice, NAB

Chris Brycki, Founder and Chief Executive Officer, Stockspot

Kate Jackson-Maynes, Partner, King & Wood Mallesons

Dr June Smith, Lead Ombudsman, Investment and Advice, Financial Ombudsman Service Australia

ASIC View Episode 6 - Commissioner Greg Tanzer on ASIC's latest enforcement report

On the latest episode of ASIC View, Commissioner Greg Tanzer speaks about ASIC's enforcement report for July-December 2015.

He covers:

- the key statistics from the report

- major outcomes that support ASIC's priorities

- ASIC's ongoing areas of focus

- and much more.

You can download the report here and read the media release here.

ASIC View Episode 5: Limited AFS licences for accountants providing SMSF advice

From July 1^st this year, accountants will need to have a limited AFS licence if they are providing SMSF advice. ASIC Commissioner Greg Tanzer talks to Hilarie Dunn about why this change is necessary and what it may mean for you.

More information can be found at ASIC's Information Sheet 179.

ASIC View Episode 4: Park Trent

Louise Macaulay (Senior Executive Leader, Financial Advisers at the Australian Securities and Investments Commission) speaks to the podcast about ASIC's recent case involving Park Trent. 

This episode covers:

- Why ASIC decided to take action

- How ASIC conducted its investigation

- Information on Self-Managed Super Funds

and more.

Episode 3 transcript

Host: Hello and welcome to ASIC View, the official ASIC podcast. On today's episode, I'll be joined by ASIC Chairman Greg Medcraft to talk about culture, its importance to the industry and what ASIC is doing about it. Greg, thanks so much for joining me on the podcast.

Greg Medcraft: Thank you for having me here, Andrew.

Host: Let's start with the basics. What does ASIC mean when it talks about culture?

GM: Well when we talk about culture, we talk about the mindset of the firm. And in fact, the law does define culture, it defines it as an attitude, a policy, a rule, a course or conduct or practice – in effect, it's the mindset of the firm.

Host: So, why is culture such an important thing to ASIC – why are we worried about the mindset of a firm?

GM: Well, clearly the mindset of a firm – what we've found is that the culture often results, if it's a poor culture, it's often pretty closely linked to a poor outcome for consumers. What we're all about is making sure that consumers can actually have trust and confidence in the financial system. So that is a key driver, often, of poor behaviour.

Host: So, culture is sort of the driving factor behind the outcomes that ASIC so often has to regulate.

GM: Yeah, we see poor culture as a key risk, often resulting in poor outcomes to consumers, and we want them to have trust and confidence, so if culture is driving poor outcomes then we really think that focussing on culture, what that driver is, is very important in terms of informing us as to where we take surveillance.

Host: Tell us a little bit about what ASIC is doing and what ASIC is able to do about culture.

GM: Well, at the end of the day we're taking essentially – I call it a two-pronged approach – so on the positive side, we're engaging with boards and where we see poor culture evident in perhaps a large bank, in a particular division, we highlight that with the board and we elevate that. We say look, we've got a problem and we want to work with you to resolve it, and I think that's important. Secondly, more broadly, we are talking to companies about culture and saying to them, well, actually you should care not just about having a right culture to comply with the law, you should have good culture because good culture is frankly good for business. Most people want to work for a company with a good culture. Secondly, if you think about it, if you have a poor culture, you end up with some issues where you end up paying – having to compensate consumers or it affects the bottom line – that's bad. And then, thirdly, and most importantly, when we live in a digital age, where your reputation – it can get through very quickly if you've done the wrong thing with social media – then frankly, at the end of the day it can affect the value of the firm. So we think there's also a broader issue about being positive about having a good culture that puts the customer first, and we see this happening with many financial firms at the moment actually focussing on the customer first, the customer experience.

On the negative side, we are focussing as I say on looking at those firms which actually we do see indicators of poor culture, and that sort of guides us in terms of our surveillance and ultimately, potentially, where we identify things and therefore enforcement.

Host: So they're sort of red flags, in terms where ASIC is focussing its attention – so if you've got an indicator of a poor culture, then you're more likely, I suppose to come under regulatory action for a variety of reasons.

GM: That's correct. I mean often companies go 'It's just a matter of a few bad apples' – well, seriously, if there's so many bad apples you've got to start thinking is there fundamentally a problem with the tree – and therefore we need to think about the tree.

Host: Yep. That leads into my next question, which is who ASIC thinks bears the most responsibility for a firm's culture – is it the employees or the higher-ups?

GM: Look, I think a firm's culture is the responsibility of everybody – that's important – it's something that everybody should be living and trying to make sure they're doing the right thing. But obviously culture starts at the top – it starts at the board, the board sets the direction of the company – and it needs to make sure that it cascades through the firm. And you know, it's not easy. Having the right culture is not easy. You've got to be constantly challenging yourself. You've got to be trying to think about how you measure how your culture is, and that often means trying to reach out to external parties to measure what people really think of you. Measuring what your employees are thinking of the culture of the firm – so, again, it's not easy. How you treat whistle blowers – people who see the wrong thing happening – are they celebrated, are they rewarded? But it is really important. Because this is not just about a regulator looking over your shoulder. it's more broadly about having a business that consumers can have trust and confidence. Especially now, when so many businesses do get disrupted by digital innovation.

Host: Do you think that firms that are looking to create a good culture should be rewarding their employees for living up to the values of that culture?

GM: Oh absolutely, absolutely. Those that actually do the right thing should be rewarded and should be celebrated, and clearly those that do the wrong thing should equally be penalised, particularly if the basically don't live up to the culture that you're looking for – the culture and the values of the firm. That is really where many companies' mindset is heading these days.

Host: That's very positive. When it does go wrong – and ASIC sees bad culture – what enforcement action is available to it?

GM: As I say, you can't regulate culture. We see it as risk indicator and generally what we find is where we pursue that as an indicator we go on and undertake surveillance, often we find misconduct and clearly where we find misconduct we'll seek to enforce the law. So if you want to grab our attention, then possibly having a poor culture is something you probably want to avoid. But again, I'll emphasis as a broader message here, is that good culture is actually good for business, it's good for your employees and it's good for the value of the firm.

Host: Do you think – and this is a question without notice – do you think that bad culture tends to come from the desire for short term gain? Because obviously bad culture doesn't happen for no reason – people can see profits or they can see extra bonuses for themselves – do you think that while ASIC argues that good culture is better in the long-term, there are those short-term elements that might attract people in creating a bad culture?

GM: Well look, you know, the long term is just a series of short terms. At the end of the day, I think that in a digital world, you need to be thinking – trust and confidence is actually a hard-won think but lost very fast. So I think that having that right culture, particularly today where things can change very quickly – you can be disrupted extremely quickly if there's a loss of trust and confidence because things can get out pretty quickly. And I will recount what's happening recently with Volkswagen, where we saw that issue of trust and confidence really hit the firm very hard in terms of the value of the company. How long will it take them to regain, if ever, that trust and confidence? So, I think that you should take a long-term view in terms of building the right culture in your company, because I think, today, things have irrefutably changed, particularly with digital disruption and also with social media.

Host: Yep. Things can go downhill very quickly…

GM: Very quickly. Very quickly.

Host: ...In this day and age. Now, obviously we can't just talk a good game. What is ASIC doing internally to address culture within the organisation?

GM: Well, clearly, culture – we don't just talk about it for third parties. We actually measure our culture every two years. We have an independent staff survey that just allows us to see what people are thinking – and we use that as a management tool to then dig down into the results to identify particular problems in the organisation, and we deal with it. We actually also have very clear values – accountability, professionalism and teamwork – and they really guide the staff on everything we do – how we deal internally with each other – but also most importantly how we deal with stakeholders. We don't just talk about it, we integrate that into our performance management system, so basically our system performance management is what I call the three Bs: your business plan, your budget and your behaviour as reflected in our values. So it's really integrated into everything we do, our values. And it is a challenge – we encourage people to talk up, speak up. One of the things I do, and I said earlier about making sure that you actually reach out as much as you can to the front line – we clearly do stakeholder surveys to measure what people, third parties are thinking – our stakeholders – but also one of the things I do as chairman six times a year is I actually have lunch with more junior and middle-level staff to basically let them speak their mind as to what they think is happening in the organisation and any concerns. So there is not a single way of making sure that your culture is working, and it's still probably an evolving area, but we really do focus on having the right culture and living -  most of the things we talk about are what we try and do as an organisation.

But nobody's perfect, of course.

Host: Yes, absolutely. Greg, thanks so much for joining me on the podcast – really appreciate your time.

GM: Pleasure, Andrew. Thank you very much, great opportunity.

Host: Don't forget to subscribe to the podcast on iTunes – you can follow us on Twitter @asicmedia – thanks so much for listening.

ASIC View Episode 3: Chairman Greg Medcraft on Culture

ASIC Chairman Greg Medcraft joins the podcast to talk about culture and its importance to the financial industry.

Episode 2 transcript

Transcript: ASIC View, Episode 2: Warren Day, Assessment and Intelligence

Host: Hello and welcome to ASIC VIEW, the official ASIC podcast. My name is Andrew Williams and I'm joined today by Warren Day, Senior Executive Leader, Assessment and Intelligence at the Australian Securities and Investments Commission. Warren, thanks very much for your time on the podcast.

WD: Great to be here Andrew.

Host: Tell us a little bit, first of all for the uninitiated, about what you do.

WD: Alright. So I look after a large team at ASIC – it's got staff in virtually every ASIC office around the country – and it's got mostly 2 large teams within that. One is called misconduct and breach reporting – so it looks after all of the complaints that the public might make, industry might make, also, say, liquidators and auditors might make to ASIC about areas where they think misconduct's occurred. So we look at all of those and then decide whether or not ASIC should do something more and then we farm it out to the rest of the organisation.

The other large group I look after is licensing – so anyone who wants a financial services licence, a credit licence, become registered as an auditor in Australia or registered as a liquidator – my team looks after that as well.

Host: You're the starting point, really. You're kind of the front door to ASIC in many ways.

WD: Yeah, absolutely. We're absolutely the front door to ASIC for a lot of stuff that comes into ASIC, yeah.

Host: So tell us about what happens when someone comes to ASIC and they make a complaint – let's start with a member of the public for example – and they complain to ASIC that someone's broken the law. What happens next?

WD: So let's just look first at how they go about that. It's about just over fifty percent comes to us through our online form, so through asic.gov.au, and so there's a point there you click called 'How to complain'. So you go through there, there's a form there, you fill it in, it comes to our staff. Everyone else basically writes us a letter. We'll still take stuff in letter form – it's better if you come through the online form – but what we do is we check a couple of really basic questions first.

So the first thing you say is there'll be a real member of the organisation who will look at it, and we'll call you, or contact you the best way we can – if we haven't got a phone number we'll contact you via e-mail or contact you via post – to say we've got it, ask any other questions, hopefully give you a bit of information straight off the bat, because we know people quick information and we know they want an answer as quickly as possible. But the first couple of things we'll ask ourselves are:

- 'Is this actually a breach of the law that we look after?' – So a lot of times, or some of the time, people will write to us and raise an issue, but it actually might not be something ASIC looks after. So it might be something looked after by the tax office, might be something better looked after by state agencies, might be something better off being looked at by the police in the State or Territory where they live. So we'll look at that and we'll tell you that immediately. So if we think it's not something that ASIC should deal with and it's something that another player should deal with, we'll tell you that: we may even refer it there and tell you we've done that, but we'll work that out.

- The second thing is part of that: if it's something ASIC deals with, generally speaking - for example it might be financial advice - the thing that the person's complaining about might actually not even be a breach of the law. So if it's not a breach of the law, we'll tell you that. Now some people will probably say it should be! That's fine, that's a legitimate retort, but we will try and tell them quickly why that's the case and so that they can then work out what they've got to do. What we'll also do, though, if it is something ASIC might be able to deal with, there might also be other ways of dealing with it. So going back to my example of someone who might not be happy with their financial adviser, what they might be unhappy about is the bad advice they think they've got. So there are dispute resolution schemes for that. So the financial licensee, the person who's got the license, their financial adviser, has to try to resolve the dispute internally first – or, if they've tried that and it's not worked, they can go to one of the external dispute resolution schemes such as the Financial Ombudsman Scheme and then try and get it dealt with that way. So we will try and help people to get as quick an outcome as possible, but then there'll be things we want to look at and we'll consider them internally. Then, depending on what our resources are like, what our priorities are like and what our focuses are like in a particular area - that will get referred to one of our stakeholder teams or get referred directly to the enforcement teams for investigation.

Host: Generally – and obviously you said before you'll respond as quickly as possible – is there a rough sort of timeframe on how quickly you try to respond in an hours or days sense?

WD: We try – our standard is we will try and acknowledge and contact you to at least say we've got your form or your letter within three business days. And again, we will try and do that by telephone if you've given us that number. Then outside of that, in terms of fully dealing with it and thinking our way through it, we try and finalise 70% of those matters within 28 days. And, you know, we get pretty close to that or have met that over the last four or five years, because we think that's a legitimate timeframe. Now of course, the issues people raise can be really complex, really difficult, so some matters will go over that timeframe but we do everything we can to meet that timeframe.

Host: Your staff, and you mentioned it before, would have a diverse range of expertise and skills because they've got to have the understanding in all areas of the work ASIC does to where they need refer it and how it needs to be addressed.

WD: Absolutely. Anyone listening to this would probably appreciate ASIC has a really wide level of responsibility across a range of things. People giving financial advice, liquidators and their duties and conduct, directors duties and conduct – you know, they're very wide areas that ASIC looks at. So our staffers generally have to have a wide level of knowledge. We have specialists even within our team who focus on certain areas, assist our staff and complement the knowledge of our own staff and are looking all the time at those matters that come through. So that helps us when we are triaging the matters and when we're deciding where those matters should go and what types of treatments we should apply to those matters. Those specialists in our team work to assist that. But what we also try and do then is bring in the knowledge of the other specialist areas of ASIC so that really there's a one-ASIC approach to try and deal with the problems that people bring to us.

Host: And is it just the public who complain to ASIC or is there a variety of types of complaint you get and complainants?

WD: We get lots of stuff from everybody. So we'll get it from parliamentarians, we'll get it from mums and dads, we'll get it from competitors, we'll get it from other industry associations, as I say, we'll get them from professionals such as liquidators, auditors, accountants, lawyers, we'll get them from other regulatory agencies. The police often refer matters to us because they think it's actually a corporate matter. We'll get it from the Crime Commission, the Federal Police and so on and so forth. So, you know, there's a wide range of places we'll get this information from.

Host: So you're fielding them from all over. And for any sort of member of the public that may be listening, is there any concern about them for the priorities – you know, do you ever prioritise industry complaints over complaints of the members of the public or are they all equal?

WD: They're all treated the same, in that respect. What we will do is we'll prioritise matters that are urgent – so if someone comes to us with something that you go 'this is actually really serious and really important and really urgent', then of course we'll move really quickly on that and we'll prioritise that. But outside of that, no, I mean we treat everything nearly on a cab rank rule. If it comes in first we want to get it out the door first.

Host: How do you decide what matters ASIC's going to investigate? I mean obviously you've talked about the urgency and the area of focus – are there other factors that you take into account?

WD: Yeah, I mean at a headline level we take into account the Commission's priorities - the Commission has two headline priorities. We want to make sure that we have informed investors and consumers in this country and we want fair and efficient markets. So they're the headline priorities. Inside of that, ASIC has got a whole range of other focuses and priorities on a 12-month basis or on a longer term basis, and so we work with the teams to understand what those areas of focus are, we then look at the matters that come to us and there's a whole range of questions we take into account. There's more information in our information sheet in this area and also our enforcement information sheet goes through this as well on our website. We take into account the nature of the offence, we take into account the amount of people involved in the offence, is it a wider public concern that this matter relates to – even though a whole lot of people may not have come to us, it might be apparent to us that this might impact a lot of people. So you know, if you talk about a set banking product – one person might complain to us but the reality is it might affect 10000 Australians. So we take all those things into account – how much money's involved, whether or not the type of offence is continuing, whether or not we're aware of this person doing bad things before – all of those things are taken into account when we make that type of assessment. Also then, the legal issues – is it the type of thing that we would get a successful outcome, is the evidence there that would assist us as an agency get a successful outcome – all of those things have to be taken into account.

Host: I've talked with other staff members here about just how much more complex a lot of ASIC's work has become with the explosion of technology and how it exponentially increases – is that something that you've observed, at the front line, as it were, where you're getting new kinds of complaints and different kinds of concerns?

WD: Yeah. So we get a lot of concerns now about new types of products, new ways of marketing those products, the fact that people from offshore are utilising the fact that the Internet's there and you can look worldwide now, it's not just domestically for different promotions and different products. There are lot of people out there looking for higher rates of return, because we're in a low interest-rate environment here in Australia at the moment, so as a result there are people looking offshore as well for investment opportunities. So we see lots of use of technology, lots of people using technology i.e. the Internet to go out and find other opportunities - and basically going in to other countries which may not have the same regulatory setting that we have. But by the same token, we're using technology to assist us. A good example – I mentioned before we have people that come through an online form, and a whole lot of people come through paper – we put a lot of information on our website to assist people, work out whether or not this is a real problem for them or for us and we do a lot of work with that information on the website to allow people to self-help, work out where they need to go, those type of things. And we know that information has been really helpful, because we know that we have a lot of people who read them and then go to the relevant place rather than staying around with ASIC, so you know, we're utilising technology in that way. We're also using technology on a proactive basis to seek out things, so when we know what the, sort of, hallmarks are of scams or other things, we will actively go and regularly search out those things and bring some of those instances in to assess further.

Host: So we've talked about the complaints, the types of complaints, assumedly occasionally there will be a complaint about ASIC itself – how does ASIC deal with those ones?

WD: It's a good question. So the types of complaints we've been talking about up until this point, Andrew, internally and publically we refer to as reports of alleged misconduct. Because that's what people are doing – they're not really complaining about us – they're actually reporting to us alleged misconduct they've seen in the market. So we refer to them as reports of alleged misconduct. True complaints, though, are complaints about us that we, ASIC, need to answer to and should consider whether or not we need to do something about. So, in the last few months ASIC has updated all of its approach to complaints handling. So, for those people who have got access to the Internet, now there's a complaint page there where they can lodge a complaint. So if they think staff have been rude to them, we've not complied with our service charter, that we've been late, we've made the wrong decision, we've been unresponsive – all those types of things – people can utilise that. If they want to write us a letter they can write to the complaints officer at ASIC in their capital city and we'll deal with it in the same way. And so what we've done now is we've got a dedicated Complaints Officer in ASIC who oversees that program. And then amongst all the teams, we have dedicated complaints managers amongst those teams who will be allocated those matters. They'll make a consideration about what's got on and we'll try and resolve them as quickly as possible, directly with the person. Because we don't it to continue, we don't want it to get worse – but the more important point is, we want to learn from that. So if there is an area that we keep getting wrong, we don't want to keep making that mistake and frustrating people. We want to actually be able to look at that, and then respond, and make changes to the way we do things.

Host: So people can feel confident, then I guess, that if they have a report of misconduct or if they have a complaint about ASIC, it's going to be handled in exactly the same manner, that there's no two different streams.

WD: No, no, so as far as the Internet webpage are concerns, they all come through the same place. But there are effectively is set process of how we look at these things, so that we can make sure we're consistent, we miss nothing and we're doing the right thing with that information that's brought to our attention.

Host: Just to finish off, just for anyone that might be looking at an ASIC job application or something like that, what do you like about working here? You've been here for a bit…

WD: Yeah, I've been here 11 years, I've got qualification in both accounting and law but I joined here as a lawyer. And look, it's a really interesting place to work. I keep saying it's never boring, and if anyone thinks they're bored they should come and talk to me and I'll find them work for them. But what I really like about this place is that it's not just a factory that deals with lawyers and accountants as its staffing group – increasingly we're getting people with business analytical skills, with project management process improvement skills, IT skills to respond to the change in markets. We know we need a lot of data and algorithm and IT skills in the place as well. This place is changing all the time in terms of what's important to us and why. So you've got a good group of people who really are committed to doing the best they can for the Australian public with the resources that the government gives us. And meeting those, you know, objectives of the Commission. So it's a great place to work, people are really friendly, we get really good outcomes, we think, for the public. Obviously there are people who think, from time to time, we're not doing what they think we should be doing, but we're confident that our people are really committed to the task.

Host: Well, Warren it's been a pleasure talking to you – thanks so much for joining me on this episode of the podcast.

WD: Great, thanks Andrew.

Host: We'll bring you many more stories from and around ASIC over the weeks to come, thanks very much for listening. 

ASIC View Episode 2: How ASIC deals with reports of misconduct

Warren Day (Senior Executive Leader, Assessment and Intelligence at the Australian Securities and Investments Commission) talks about what happens when you make a report of alleged misconduct or a complaint to ASIC.

You can find more information in our Information Sheets:

Reporting misconduct 

ASIC's approach to enforcement