The chairman of the Australian Securities and Investments Commission (ASIC), Jeffrey Lucy, used the Investment and Financial Services Association conference on the Gold Coast to express concern that Australia’s prolonged period of economic growth had prompted investors to become too adventurous.
Lucy told the conference that consumers were now being confronted by a greater variety of investment products and this was worrying in circumstances where more complex and speculative offerings were concerned.
“From our perspective, the complex and speculative schemes are more worrying in the retail consumer sphere unless accompanied by disclosure that really allows consumers to understand the product and make good decisions in their own interest,” he said.
“I appreciate the need for your industry to be innovative in an extremely competitive and global market. There are many consumers who are able to understand and benefit from investing in complex products, but there are also many who either do not understand adequately the consequences and risks of such investments or whose individual profile and circumstances make it likely that these products are inappropriate,” Lucy said.
He said evidence suggested that investors were increasingly willing to take on more leverage and purchase a wide range of financial assets.
“This is despite historical evidence that an economic downturn will typically follow times of economic prosperity, such as that which we have experienced over the past 14 years,” Lucy said.
He said that with a substantial portion of the managed funds sector accounted for through wealth management and advice activities, it was incumbent on the industry to provide a leadership role.
Lucy said that, for its part, ASIC intended to play its part by way of increasing use of so-called “real-time regulation” and compliance-based solutions such as enforceable undertakings.
