Australian Senator Andrew Bragg recently criticized the current regulatory framework for the financial sector in Australia. In particular, he pointed to what he sees as failures in the country's twin peaks model of two independent regulators focused on market conduct and supervision, represented by the Australian Securities & Investments Commission (ASIC), and financial system stability, through the Australian Prudential Regulation Authority (APRA).
In an address to the Financial Services Council (FSC), Bragg argued that both ASIC and APRA are failing in their mandates. He alleged that ASIC neglects to address corporate misconduct effectively and that APRA does not sufficiently enforce the best financial interests duty (BFID) in superannuation funds.
Bragg, who has led an inquiry into ASIC since October 2022, highlighted instances where ASIC allegedly failed to act on reports of corporate misconduct. For example, he argued that failures of oversight at companies like Nuix and Dixon Advisory ultimately lead to significant losses for investors. With respect to APRA's supervision of super fund practices, Bragg expressed concerns that the regulator favored older members over younger ones.
In response to these issues, Bragg proposed a Financial System Inquiry (FSI) to address structural problems in the regulatory framework. He declared that the twin peaks model has outlived its usefulness and called for a recalibration of the regulatory system. Bragg outlined several areas for examination during the FSI to include payments, taxation, housing affordability, superannuation's influence on the economy, deregulation opportunities, and a review of the overall regulatory architecture.
Bragg, who contributed to Starling's 2022 Compendium, emphasized the need for bold reforms to ensure Australia's competitiveness in the financial services sector and maintain its status as a regional hub. He argued that the proposed FSI, coming nearly a decade after the last one, is necessary to address the deficiencies in the current regulatory enforcement and to capitalize on opportunities for improvement.
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