The chair of the Australian Securities and Investments Commission (ASIC) has voiced concerns "that many people in finance have lost sight of the ultimate purpose of the financial system".
James Shipton looked at the discussions at the Royal Commission around conflicts of interest and said that management not taking these dealings to heart was "verging on a systemic issue".
Speaking at the Australian Council of Superannuation Investors Annual Conference in Sydney, Shipton said he was surprised "there has been reluctance, and often resistance, to addressing conflicts, especially those embedded in remuneration – even when ASIC pointed them out".
He singled out the report into mortgage broker remuneration and encouraged financial firms to look at their processes and to manage or remove any possible conflicts.
He also suggested that many people in the industry have forgotten it is about managing other people's money, instead focusing on how they can maximise their own earnings.
He said, "Too often, unacceptable conflicts were justified by firms on the basis that ‘everyone else is doing it’, even though it’s the right thing to do to end them. A business culture that is blind to conflicts of interest is a business culture that does not have the best interests of its customer in mind. Moreover, it is one that is not observing the spirit as well as the letter of the law."
Shipton also made reference to many of the other issues stemming from the Royal Commission, particularly where ASIC was misled in its own reviews of systems.
He said, "Whilst we have been trying to do our job, unfortunately, all too often, the firms who have failed in their first line responsibilities have made matters worse by not cooperating with us and, in some unacceptable cases, actually obstructed our work.
"These firms have not just failed in their first line compliance duty, they have jeopardised the entire regulatory structure. What’s more they have endangered the financial system they are meant to support.
"This cannot stand, because if firms continue to fail to step up to their responsibilities, the integrity of our regulatory structure, and our financial system, is undermined."
As part of the address Shipton also gave an outlook on the future of ASIC. The group is looking at reforms to have a stronger ability in taking regulatory action against senior managers, new ways of supervising institutions and encouraging the adoption of regulatory technology across the financial sector.
