The Australian Securities and Investments Commission is planning to monitor financial firms more closely, to ensure that senior management create the correct culture and deal with “broader, more pervasive” misconduct problems in the sector.
Speaking at the Fourth Annual Australian Regulatory Summit, held earlier today in Sydney, ASIC chairman Greg Medcraft outlined plans to clamp down on financial services companies and their employees that are seen to have the wrong culture.
He said that the regulator is now looking to introduce checks to ensure that systems are in place at firms where “everyone has ownership and responsibility” for “doing the right thing”.
“Culture is a set of shared values or assumptions,” Medcraft said. “It can be described as the underlying mindset of an organisation. It shapes and influences people’s attitudes and behaviours towards, for example, customers and compliance.
“It has been said that ‘culture is the new black’. It is on the minds of governments, regulators, boards, senior executives, and customers globally. ASIC is concerned about culture because it is a key driver of conduct within the financial services industry.
‘Early warning signs’
“By focusing more on culture, we expect to get early warning signs where things might be going wrong to help us disrupt bad behaviour before it happens and catch misconduct early.
“We also think it will help us with identifying not just individual instances of misconduct, but broader, more pervasive problems,” he said.
Medcraft warned that poor culture often leads to poor outcomes for investors and consumers, impacts on the integrity of the Australian financial markets, and can erode investor and financial consumer trust and confidence
Role of the board, other staff
Medcraft pointed out that the regulator “cannot monitor everything”, but added that it is aiming to ensure that in any organisation, values and cultural leadership must “come from the top”.
“We are interested in reducing poor outcomes arising from poor culture,” he said.
“While all levels of management and indeed individuals contribute to culture, what the board says, does and most importantly expects, is absolutely critical in setting the tone for the organisation.
“In terms of what ASIC will do, where we identify poor culture, we will make this clear to the firms in which we see it. We think it is important to share this information with directors given their role in guiding and monitoring the management of the company.”
The regulator will also be looking to encourage “the right policies” around whistleblowers, to ensure that information can come to light and that whistleblowers are supported in this process.
“We recognise that culture is not something that can be regulated with black letter law,” added Medcraft. “We know that it isn’t feasible to check over every company’s shoulder to test its culture, or dictate how a business should be run.
“Culture is at the heart of how an organisation and its staff think and behave. It is an issue that companies themselves must address.”
To see Medcraft’s speech in its entirety on ASIC’s website, click here.
To read about how some overseas clients of an ASIC-regulated Australian fund management house that collapsed in 2013 have been trying to get their money back, click here.