The CFA Institute, a global organisation representing the investment management industry, has spent much of the last decade dealing with the fallout from the Global Financial Crisis (GFC) but is now casting its eye to Australia following the royal commission.
Despite intense public outrage in the aftermath of the GFC, no chief executives from Wall Street ever faced prosecution.
Appearing on TICKY on Tuesday, the organisation’s US-based chief executive Paul Smith was asked whether the “Gordon Gekkos” of the finance sector – a reference to the memorable villain in 1987 Oliver Stone film Wall Street – have been sufficiently held to account.
“[In the wake of the GFC] there were no heads on stakes. Do you think that has to happen for a cleansing?” Smith was asked by Your Money’s Ticky Fullerton.
“I don’t think it has to happen for a cleansing,” he responded. “But I think it should be part of the ongoing process. You can go too far with that, but I do think the odd example needs to be made.”
Smith said the ongoing financial services royal commission led by Commissioner Kenneth Hayne presents a unique opportunity for the industry to reform, although it’s crucial to strike the right balance, saying he is “excited” by the inquiry.
“I think that has been a challenge, and certainly something that the Hayne report and the commission calls out is that not enough action has been taken against individuals,” he said.
Demonstrated during the public hearing rounds, and reinforced in the interim report, was the fact that the Australian regulators had done an ineffective job.
In his interim report, Hayne noted that the regulators ASIC and APRA had failed to adequately punish misconduct in the financial sector, writing that “little more was done than utter the apology and make the promise.”
Smith said that it was CFA Institute’s belief that correct regulation should mean that those found to misbehave are punished in one way or another.
“We’re a professional body and we have a professional conduct program and if we find a charter holder who has misbehaved we take their designation away from them and we try to work hand in glove with the regulators to make sure that that happens,” he explained.