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Failure to rein in financial advice scandals puts at risk consumers and honest small businesses

Greens spokesperson for Competition Policy, Consumer Affairs and Small Business, Senator Peter Whish-Wilson, says that today’s revelations in the Fairfax papers about scandals in the NAB financial advice arm is the last straw for the Government in failing to regulate and properly investigate the sector.

Senator Whish-Wilson says “Previously the former Acting Assistant Treasurer, Senator Mathias Cormann, when arguing against the Future of Financial Advice laws, denied there was any systematic failures of culture in the financial advice industry, laying the fault with a ‘few bad apples’.

“We have now seen failures with the Commonwealth Bank, Macquarie Bank, in the selling of Managed Investment Schemes like Timbercorp, and today with NAB. These appear to be industry-wide structural problems.

“These failures of culture and of regulation risk further shattering the financial services industries reputation and this erosion of community trust will hit honest hard-working financial advice small businesses the most.

“I have met dozens of independent financial advisers whose reputation has been unfairly damaged by the Abbott’s Government’s inability to reign in the systematic problems within the big players in the sector.

“The government needs to act immediately to address cultural problems in the big banks and look at what they can do to rein in the conflict-of-interest problems inherent with the vertically-integrated, commission-driven model.

"The next important step is to introduce mandatory FOFA style regulations to tackle the conflict-of-interest and risk issues ASIC have recently identified in the insurance industry.

“There was tri-partisan support on the ASIC Senate Inquiry to establish a Royal Commission into the Commonwealth Bank. There is now an urgency to broaden any Royal Commission into white collar crime and cultural problems in the big end of the financial advice sector, especially around the vertically-integrated companies.

“The Government sought to deregulate the financial advice sector, and then they cut the budget of ASIC and weakened their ability to investigate fraud. It is time that the government took some strong action and stood on the side of consumers and small businesses in the financial services sector,” he concluded.

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