POWERED BY MOMENTUM MEDIA
Editorial: Publicity a powerful weapon
There have been two events in the past month or so that ought to give our financial services regulators pause for thought.
The first was the Australian Securities and Investments Commission’s (ASIC’s) handling of the publicity surrounding the imposition of enforceable undertakings relating to superannuation switching.
The second was the publicity surrounding an Administrative Appeals Tribunal (AAT) decision effectively overturning an enforceable undertaking and disqualifications imposed by the AustralianPrudential Regulation Authority (APRA) with respect to the AXA Australia Staff Superannuation Fund.
What these two events clearly demonstrate is the power of our financial services regulators and their ability to leverage the media to prosecute their agendas.
Indeed, the stories surrounding the AMP and AXA enforceable undertakings cannot fail to send a shudder through the boardrooms of all financial services companies no matter their size. They demonstrate that even when you play by the rules you can be exposed to considerable reputational damage. They also demonstrate that our regulators can and do get it wrong.
The story behind the AAT’s decision to set aside APRA’s disqualification of seven directors of the former trustee of the AXA Australia Staff Superannuation Plan not only reflects how important it is for the regulator to get it right, it also reflects the damage that can be inflicted by the publicity surrounding such moves.
While AXA was exposed to a certain amount of adverse media coverage in May, 2005, that publicity ceased when the AAT in June, 2005, imposed confidentiality orders preventing further public discussion of the matter.
It is revealing to note that even after the AAT overturned APRA’s decision to overturn the AXA disqualifications, the regulator was still complaining that it had been prevented from making public statements relating to those disqualifications.
Moreover, in the weeks after ASIC and AMP Financial Planning made public the issues surrounding the imposition of super switching enforceable undertakings, ASIC chairman Jeffrey Lucy continued to discuss the issue at a number of key forums, including August’s Investment and FinancialServices Association(IFSA) annual conference on the Gold Coast.
Having taken a beating in the media for almost a week following the announcement of the enforceable undertakings, it is not difficult to imagine that some of the senior executives at AMP were less than impressed by the regulator’s efforts to maintain the issue as a talking point.
Of course, unlike AXA, AMP Financial Planning opted against appealing the issue to the AAT, so there was no possibility of the matter being subject to confidentiality orders.
A number of senior officials within both APRA and ASIC have claimed that they regarded the giving of enforceable undertakings by financial services companies as being far preferable to pursuing legal action. Indeed, Lucy actually confirmed in his address to the IFSA conference that AMP had actually offered to enter into an enforceable undertaking with respect to the super switching issue.
Lucy might have gone further and noted that AMP’s offer to enter into the enforceable undertaking was not unusual. He might have pointed out that most major financial services organisations adopt a similar approach when they identify shortcomings within their operations.
The question that needs to be considered by the regulators is the degree to which generally well-run financial institutions are harmed by the publicity that inevitably surrounds the imposing of enforceable undertakings. No one would argue with a regulator publicly and loudly exposing a serial malefactor, but that was hardly the case with either AMP Financial Services or, indeed, AXA.
Reputations are deservedly hard-won in the financial services arena and just as it ill-behoves politicians to make unsubstantiated statements against companies and individuals behind the veil of Parliamentary Privilege, it ill-behoves regulators to overplay their hand when it comes to the publicity surrounding matters such as enforceable undertakings.
AUTHOR
Mike Taylor
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