ASIC wants powers to change high-risk pay structures

Saturday, 13. April 2019

AFR and Deloitte Banking and Wealth Summit.Sofitel Wentwoth, Sydney. Conduct Risk & Risk Culture roundtable with Peter Kell, Deputy Chairman ASIC .April 5 2016. Photos Quentin Jones. Photo: Quentin JonesThe corporate watchdog is seeking greater powers to step in and change how some salespeople in the financial sector are paid, to prevent staff having an incentive to promote inappropriate products.
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The Australian Securities and Investments Commission deputy chair, Peter Kell, on Wednesday made the case for the regulator receiving beefed-up powers to intervene in the design and distribution of financial products.

The federal Treasury is consulting on a proposal to give ASIC these powers, which would allow it to veto higher-risk products.

But Mr Kell said the watchdog wants an extension of the Treasury’s proposal, and is also seeking the power to ban certain types of pay structures that are clearly against the interests of customers, such as certain types of commissions.

If it were given these powers, it would allow the watchdog to rule out the “most pernicious” aspects of how some financial products are sold to customers, Mr Kell said.

“We are keen to have the product intervention power not only in how the product has been designed, but also the associated way that people are remunerated for selling it,” he told a Senate committee inquiry into consumer protection in the banking, insurance and financial sector.

“You can imagine there may be instances where the product itself is not necessarily a problem, as long as it is sold to the right people. But if people are being paid very high commissions or other sorts of benefits for selling it, then the temptation will be to sell it to the wrong people.”

“That for us, I think is the key area where we think we would like to see an extension to what has been proposed.”

Mr Kell gave the example of “flex commissions” paid by lenders to car dealers – where a dealer receives a higher commission if a customer takes out a car loan with a higher rate of interest.

Current rules made it much more difficult for ASIC to address this “really unfortunate” practice, which had embedded itself in the industry.

“We have stepped in and done something about that, but it has taken us a lot longer, and it has been a lot more convoluted than would have been the case with a product intervention power.”

Customers who are vulnerable or have poor financial literacy were most likely to be victims of this type of commission, he said.

Perversely, incentives such as “flex commissions” tended to be adopted across the industry, because failing to do so would hurt sales of loans.

Mr Kell was also asked about recent reports by News Corporation of internal documents that showed ASIC staff before 2015 seeking feedback from banks on draft press releases about misconduct within banks. He said the regulator had since changed its approach, and the emails reflected “healthy debate” within ASIC.

ASIC’s push for greater intervention powers comes as the banking industry is pledging to overhaul how it pays frontline staff, by reducing sales targets linked to bonuses, and cutting commissions paid to mortgage brokers.

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Security fears over new technology being rolled out across NSW

Saturday, 13. April 2019

SMH News story by, Lucy Cormack. The end of the Government solar feed back tarrif. Photo shows, Solar user, Michael Kwan at his Killarney Heights home. He has decided on installing a smart meter, which will allow him to switch to a metering system on 31 December. It then allows him to use his solar energy to meet his household needs. Afterwards any excess electricity generated, and not used, is exported to the grid. Photo: Peter Rae Thursday 19 May 2016. Photo: Peter RaeYou probably don’t remember the exact time you last opened your refrigerator.
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But an electricity smart meter will.

It will also remember the age and brand of your appliance and how it is being used in the home – and all conveniently in real-time.

But a University of Canberra cybercrime expert has questioned the cost of such convenience in a new report, arguing that current smart meter technology could place consumers’ privacy and security at risk.

“It is great to be connected and online, and we need to embrace what’s coming at us down the pipes,” said Nigel Phair, director of the Centre for Internet Safety at the University of Canberra.

“But we are not doing it in a measured or consumer-informed way. An insecure and accessible smart meter is a great way to tell when homeowners are away for extended periods of time.”

Smart meters are digital devices that electronically record water, electricity and gas usage and transmit the data to the utility operator in real-time.

Currently a smart meter is formatted to allow either a one-way or two-way transmission of data, with the latter the most commonly used in the Australian market.

One-way meters record the amount of water, electricity or gas at a pre-set interval, which is then transmitted to the provider, while in a two-way device, usage is not only sent to the energy provider but the provider can also push data and messages back to the meter.

To date smart meters have been rolled out on a voluntary basis in NSW, after a mandatory mass roll-out in Victoria was widely criticised.

But from July this year, any new meters installed in NSW homes must be a smart meter.

As well as being more costly, Mr Phair said a two-way device raises a number of security issues, as information transmitted is often unencrypted.

“I think smart metering is the future. But as we stand today we should only have one-way transmit meters until we sort out security,” he said, adding that providers could use push notifications in two-way meters to send advertising or turn off power to a home, if a bill has not been paid.

An Origin spokesperson would not confirm if information on its smart meters was encrypted, but said all devices and related systems featured “security measures” to protect all data.

“Origin’s digital meters comply with relevant privacy legislation and electricity market rules.”

In 2009 a criminal operation in Puerto Rico contacted the general public with an offer to covertly reprogram their smart meters for a fee, to falsely reduce their apparent usage, saving them up to 75 per cent off their monthly electricity bills.

An FBI investigation later found the Puerto Rican electrical and power authority lost nearly $400 million dollars in annual revenue.

Mr Phair said the case showed just how easily such technology could be compromised, and said it points to the need for public policy and “certainty in the marketplace about the security of devices”.

Energy Australia installed its first smart meters in Victorian customer homes in 2009. In the period since, an Energy Australia spokesman said there had not be “no known security breaches.”

“As well as adhering to national regulatory rules, we ensure our meter service providers routinely monitor their smart meter security systems so they are safe, secure and customers are protected.”

He said Energy Australia smart meters were not integrated with home technologies like wireless networks or telephones, adding that any smart meter data would continue to be shared “via independent and secure networks which do not overlap with the customer’s own wireless networks.”

An AGL spokesperson said its digital meter data was “confidential and encrypted,” and did not contain names or addresses.

“Data can be transmitted in two ways between the meter and the meter provider, which is important to enable meter software/firmware to be updated. We have not experienced customer data breaches ,” he said.

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‘Pain spend’ is hitting households where it hurts

Saturday, 13. April 2019

Those balancing household budgets will not like the latest economic data. Inflation figures released by the Australian Bureau of Statistics on Tuesday show the consumer price index, the key measure of inflation, rose 0.5 per cent in the March quarter – and driving that increase were essentials like petrol and housing.
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Even though inflation was slightly weaker than expected, economists largely agreed the price growth was strong enough for the Reserve Bank of Australia to take interest rate cuts off the table. The annual rate of CPI growth lifted to 2.1 per cent, just above the lower end of the bank’s inflation target.

But commentators also noted that the price increases were not noted in areas that signalled economic growth, with the most significant price rises in the quarter being petrol (up 5.7 per cent) and electricity (up 2.5 per cent).

These are things households have to buy when at the same time their wages are barely lifting and their debts are high.

CBA economist Michael Blythe thinks that dynamic could impact on consumer spending, and thus affect the wider economy.

“Rising petrol prices, up 12.9 per cent over the past two quarters, are now having a negative impact on consumer spending power. In fact spending on areas that are largely outside consumer discretion, such as fuel, health, insurance, utilities etc., is on the rise, up 1.6 per cent in the quarter and 4.2 per cent over the past year,” he said.

“Trends in this ‘pain spend’ influence household’s perceptions of financial pressures, with a flow???on to sentiment and spending appetite.”

The pain was lessened slightly by a 6.7 per cent drop in fruit prices.

Underlying measures of inflation, which smooth out volatile price swings and are key to interest rate decisions, averaged just over 0.4 per cent growth in the quarter for an annual rate of 1.8 per cent.

In response, the Australian dollar lost a little ground, dropping from about 75.45 US cents prior to the release to around 75.2 US cents.

The RBA will hold its next monthly board meeting on Tuesday, but is expected to leave the cash rate at a record low of 1.5 per cent.

Hopes that March’s strong rise in employment was a turning point for the economy may prove premature as new figures show wilting demand for new workers.

Job advertisements on the internet declined 0.6 per cent in March after a revised 0.3 per cent fall in February in trend terms, Department of Employment data released on Wednesday shows.

This left annual growth at just 0.9 per cent.

Six of the eight occupational groups monitored by the department fell in the month, declining in three states and the ACT. Ending the rate cut talk

“Today’s CPI should bring to an end the debate about near-term rate cuts,” UBS economists said in a report.

“We expect core inflation to stay below the RBA’s target until [the first half of 2018], amid a housing correction that sees the RBA waiting to normalise rates until at least [the second half of 2018].”

Economists at Citi noted a lack of market-based inflation, with seasonal rises in areas such as healthcare, education, and insurance coming alongside higher petrol and housing costs

“We don’t expect much upside pressure in market determined prices in the future. Slow domestic demand growth and more competition from online and global retailers will constrain price growth in the non-food retail sector,” they said.

“More generally, low private sector wages growth and the increase in some mortgage interest rates at a time of record high household debt will prohibit many market-based CPI price lines from increasing at anything but a snail’s pace.”

Citi’s economists reckon the result is likely to stay the RBA’s hand for the rest of the year.

“For the RBA, its two main concerns are the subdued labour market and risks to financial stability. With these concerns pulling in different directions, we continue to expect no change in the cash rate this year. Any cash rate increase remains a distant possibility.

“We pencil in the first rate hike for [the December quarter of] 2018 as the RBA seeks to move away from historically low interest rates only when there is a likelihood of trend growth that removes the negative output gap.”

Capital Economics’ Paul Dales has abandoned his prediction of further rate cuts.

“The rise in underlying inflation in the first quarter, coupled with the RBA’s financial stability concerns, dramatically reduces the chances of any further interest rate cuts,” he said.

“When taken together with the RBA’s valid concerns that cutting interest rates further would threaten financial stability, today’s data suggest that underlying inflation is now at a level that the RBA will be willing to tolerate.

“As such, we are no longer expecting the RBA to cut interest rates further.”

He now expects the central bank to hold rates steady for at least the rest of the year.

Barclays’s Rahul Bajoria reckons rates wil be higher in a little over a year’s time.

with AAP

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Buy, sell or hold your sporting investment portfolio?

Saturday, 13. April 2019

With the Treasurer about to deliver his federal budget within two shakes of a burnt stick, it is time for your humble correspondent to deliver my annual advice on your sporting investment portfolio, as regards which shares to buy, sell, and hold.
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John Coates. $7.02. Sell.

Tough call, but there is no way around it. His was a solid blue-chip stock until a couple of months ago when the challenge by Danni Roche for presidency of the AOC saw his price plunge from $12.57 to $8.22 practically overnight. Recent revelations have seen it fall further, and there are more to come.

Danni Roche. $3.58. Buy

Just 27?? three months ago, she is now rising by the week. If she gains the presidency, projections put her in the high $5-$6 range. (At that point, however, I’d sell. Remember Maxine McKew who did a staggering job defeating the sitting Prime Minister, John Howard, in Bennelong in 2007, and was rarely sighted thereafter. Ms McKew’s shares were never higher than on election night. I don’t necessarily say that will happen to Ms Roche as, after all, she will automatically take the top role should she win, and not be a mere back-bencher. I do say, however, that the fever of her accomplishment should push the shares to be well above their true value, in the short term.)

Rugby union. $2.46. Buy

A totally undervalued stock. There is no doubt whatsoever that the game is stinking up the joint in Australia. When I called the NSWRU the other day and asked what time the next home match starts, they said: “What time can you get here?” But all those wise-head brokers who are encouraging their clients to unload rugby portfolios at any price, forget that beyond Australian shores, rugby is booming as never before. Ultimately it is that value, those rivers of gold that continue to flow into the Australian Rugby Union’s coffers from overseas broadcasters ready to pay top dollar to see Australian teams that will sustain rugby through this distressing time of the “Depression Years”. (See, the last decade-and-a-half, since we held the Bledisloe Cup.)

Undervalued: A familiar Waratahs pose of late. Photo: Getty Images

A-League. $3.42. Hold

It is too hard to work out. I think it’s struggling. You think it’s struggling. But for some reason I don’t get, the insiders say it is as strong as ever, and getting stronger. On the other hand, soccer people always say that. It’s just in their blood. And so is falling to the ground screaming blue murder, even if you give them a light tap. Best thing is just to move on.

AFL. $19.52. Buy

It’s as blue-chip as they get, and is getting bluer. It is true that the AFL cheats somewhat by putting something in the water of the AFL follower that makes them mad for the game from the cradle to the grave, but it works for them. And the stunning success of the Women’s AFL this year highlights both how well run the game is, and how far ahead of everyone else they are in making their game grow.

NRL. $12.52. Sell

Something is going on this year, something like a change in the wind, whereby though all the media is still totally behind the game, the “buzzzzz”, is just not quite there. Plus, watch the concussion issue as it plays out in the courts. Todd Greenberg has done well this year to try to get on top of it, but I’ll bet it’s too late. Whatever happens in the current case, it is inevitable the game will face some serious pay-outs in the future which will push the share price down further. Finally, as more and more is known about concussion and the devastating long-term effects, it is equally inevitable that both players and spectators will veer away from what remains one of, if not the, highest-impact sports in the world.

Golden moment: Michael Gordon jumps on Mitchell Pearce in celebration after the Roosters field goal that sunk the Dragons on Tuesday. Photo: Getty Images

Australian Cricket. $25. Sell

Just before the Ashes. As that fascinating report in the SMH yesterday made clear – Channel Nine is thought to have lost up to $40 million by broadcasting the game last year – the professional game might be well past high noon in Australia, and just starting to wane. Sunset is no time soon, but the simple truth is it does not grip everyone the way it once did. Of course it will return to fever pitch just before this summer’s home Ashes campaign, it always does, but that fever hides the truth – with the loss of the West Indies as a serious competitive side, international cricket has lost one of its prime pistons and is lagging accordingly.

Raiders. $3.85. Buy

There’s something about that mob, under Ricky Stuart. About four years ago I got into the ear of their chair, telling him he had rocks in his head to take on Stuart, as he was just too intense and made his players wither, rather than grow. The chair ignored me, and was right to do so. Sticky has transformed them, and even though they’ve had a couple of unlucky losses, they will be dangerous come the finals.

Penrith. 62??. Sell

The Penny Panthers have become the Penny Dreadfuls in the space of just six weeks or so, and no team in the country has been more Ordinary on the All-Ordinaries Index than them – and there is no sign it is going to end any time soon. I can never work out where in Phil Gould’s “rebuilding phase” they are up to, but that roar in the distance ain’t more builders coming. It is Joe’s Bulldozers, on their way to knock over what’s up already and start again. It is going to be very expensive, won’t necessarily work, and that will push the share price down even further.

Come to think of it, an investment in Joe’s Bulldozers could be very useful. If the Waratahs, Swans and Collingwood don’t start winning soon, Joe will be very busy indeed and should make a fortune!

Twitter:@Peter_Fitz

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Shining a light: Former netball boss speaks out

Saturday, 13. April 2019

Deposed Netball Australia director and former chair Anne-Marie Corboy has warned against underestimating the threat posed by the AFL Women’s league in the newly-competitive national environment, while staying cautiously optimistic that the power play orchestrated by the state associations will not derail netball’s recent progress.
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Speaking publicly for the first time about the divisive internal politics that have forced the involuntary departures of Corboy and former Australian captain Kathryn Harby-Williams from the board, the experienced businesswoman said governance reforms being driven by the Australian Sports Commission remained of critical importance.

“It’s very disappointing that this has played out over the last week, but maybe it’s a shake-up that was needed and it has shone the light on some things that need to be addressed in the sport,” Corboy told Fairfax Media. “Netball has had this great year and this little glitch that’s become public won’t detract from that.”

Corboy is supporting Paolina Hunt’s bid for re-election as chair at Friday’s board meeting – the first since last week’s AGM expanded the directorial power base of the state bodies led by chief agitators Netball Queensland and Netball NSW. She also urged the member organisations to take a broader view.

“I think there’s still a lack of understanding about the competitive environment in which netball is now operating,” Corboy said. “In fact one of the member organisation CEOs said to me ‘Well, we’re not really worried about AFL at all’, and I think that’s a demonstration that the MOs continue to see the world from their own state’s position and at times find it difficult to see the big picture. And of course Netball Australia is dealing with the big picture.”

Corboy, who succeeded long-time chair Noeleen Dix last April, said the genesis of the unrest came through the stalling of ASC-mandated constitutional reforms in early 2016, with the state associations deferring moves to abolish the role of president – now held by WA’s Robert Shaw – and angered by the drawn-out negotiations for a Super Netball broadcast deal.

“That put pressure on the organisations to be prepared for this year, and I think that’s where a lot of the tensions arose,” Corboy said, admitting the states’ full list of “gripes” included the admission of football club-owned teams, and even the competition’s fixture. “And when some personality issues came into it, that mix just created an environment where the Netball Australia board wasn’t able to prosecute its agenda in the way that we wanted to, and for me to prosecute my agenda as chair, because we were operating in that very tense – and, in fact, litigious – environment. There was a lot of correspondence between lawyers that was started by the member organisations.”

The states having rebuffed attempts to mediate, while citing dissatisfaction with Corboy’s leadership style, the former MCG Trustee stood down as chair last month. In a coup the Australian Netball Players’ Association condemned as “an inexcusable lack of judgment that only serves to satisfy self-interest”, she was then removed from her board role at a special general meeting without explanation or any suggestion she had breached her director’s duties.

Calling for the implementation of a unitary administration model that would abolish the state associations and redirect financial and personnel resources to the athletes, and keen to correct apparent misconceptions about netball’s funding arrangements and strategic priorities, Corboy believes the next 12 months will be “critical” to the sport’s future.

“We’ll see who is elected as chair on Friday and I think that will also be an indicator,” said Corboy, who hopes new chief executive Marne Fechner will be given the necessary board support to build on revenue, audience and participation growth that has accompanied the start of Super Netball. “I think that what’s lost in all of this is that netball has had one our best years ever … in the most competitive sports environment ever.”

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