ASIC criticised over national exam

20-Jan-2015

By Julie May

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ASIC’s proposal to introduce a national exam for advisers would have little impact on ridding the industry of dodgy planners and further had the potential to give investors a false sense of security, the Capital Markets Cooperative Research Centre (CMCRC) has said.

CMCRC chief executive Professor Michael Aitken said while ASIC chair Greg Medcraft had claimed he was “driven by passion” in regard to proposing such an exam, he had provided little evidence to back up claims the test would increase Australians’ trust and confidence in financial advice.

Aitken said he wanted to see a more evidence-based approach to ensuring retail financial markets were fair and efficient, suggesting a better way to approach the issue would be to evaluate whether the introduction of the Series 7 exam in the United States was effective in reducing fraud and mis-selling.

“The proposed national examination will have costs, which will no doubt be passed onto clients, and it needs to be evaluated in light of the desired outcome,” he said.

“Personally I doubt whether the ability to pass an exam is going to have any impact on integrity-challenged individuals other than clearly telling them where the line they are not to cross actually is.

“I rather think such individuals are likely to ace such tests and provide investors with a false sense of security.”

He linked the proposal for the exam to the wider issue of regulators’ inability to articulate clearly how the changes they regularly authorised met their mandates.

“ASIC has been making or authorising changes to the structure of financial markets for years without ever providing a procedure, let alone systematic evidence, on how those changes affect its objective of ensuring financial markets are ‘fair and efficient’,” he said.

“It’s time we demanded an evidence-based policy-making framework from our regulators, given the power they have over markets.

“They cannot be permitted to authorise a change to market structure based on regulatory fervour or fiat, which appears to be the main motivation for the proposed national exam.”

The FPA recently said on the topic of various national examinations that it supported the recommendation of the Parliamentary Joint Committee on Corporations and Financial Services that advisers must pass a ‘registration exam’ to be listed on the ASIC national adviser register, set to be launched in March.

The association, however, said the need for a national competency exam, which ASIC had been pushing, would be redundant once entry standards for financial planners were raised to a degree qualification.

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