In his first speech since becoming ASIC Chairman Greg Medcraft has taken the opportunity of speaking to the Financial Ombudsman Service’s conference to set out the approach he intends to take.

In acknowledging that disclosure by issuers of investment products to investors of risks was not sufficient on its own to protect investors, Medcraft looked at the role of the ‘gatekeepers’ of the financial services system.

‘Gatekeepers’ are the intermediaries who provide or assist in providing investors and financial consumers with the information they need to navigate the financial world. Gatekeepers collect, evaluate, advise on and endorse information about companies, assets and investments. They are involved at all parts of the value chain. They include financial advisers, lawyers, auditors, custodians, actuaries, research houses, credit rating agencies and independent experts, and those involved in the product approval process. Investors and financial consumers rely on gatekeepers to act with the utmost integrity. Where gatekeepers fail in their role, this can have a serious consequence for retail investors and financial consumers.

Medcarft said that ASIC will be focussing on 5 areas:

• ensuring that Australian financial services (AFS) licensees have adequate financial resources to conduct their business;
• requiring credit rating agencies (CRAs) to lodge an annual report with ASIC about their compliance with the IOSCO Code requirements, including around the management of conflicts, staff competency, and their ratings methodologies;
• the quality of financial advice given to retail clients;
• the product approval process: to help retail investors and consumers, for example, by requiring product issuers to scrutinise new products to see if they are likely to be suitable for their intended target market;
• providing adequate compensation for retail investors and consumers when things go wrong for investors and financial consumers through licensee misconduct.

ASIC will also be issuing best practice guidance for advertising financial products and services and credit products and services.