Abbott tipped to ignore Senate call for ASIC and CBA probe

THE ABBOTT government appears unlikely to act on a call for a royal commission into the companies' regulator and Commonwealth Bank, despite a Senate report highlighting problems in the financial advice sector.

A damning report of a Senate inquiry on Thursday recommended a judicial inquiry be undertaken to investigate allegations of fraud and misconduct at the bank and failures inside the Australian Securities and Investments Commission.

It also highlighted conflicts of interests and failures to inform clients about investment decisions made on their behalf, which may be further entrenched by the government's planned changes to Labor Future of Financial Advice reforms.

While Finance Minister Senator Mathias Cormann last week announced it would retain some measures of Labor's reforms, the partial back down was criticised for not doing enough to protect consumers from dodgy financial advice.

Labor's reforms, passed last year, were originally put in place to help protect consumers after the Storm Financial collapses that saw small investors lose millions in retirement savings.

Despite the recommendations, Finance Minister Senator Mathias Cormann said rather than supporting the call for a royal commission, arguments against it by Liberal Senator David Bushby were "persuasive".

"The Government is carefully considering the findings of the report and its recommendations and will provide a considered response in due course," he said.

"Many of the recommendations concern the operation of ASIC. Without pre-empting the Government's response, a comprehensive review of the financial system is already underway, which is considering the regulatory framework, including the role of ASIC."

But the report also found a range of failures in the financial advice system, and recommended more rigorous training and regulation for advisors and the industry overall.

Industry Super Australia chief executive David Whiteley said the issues highlighted warranted an "immediate halt" to the government's change to FOFA laws.

He said any decision about the financial advice reforms should not be made until a decision was made on the Senate inquiry's recommendations.

ASIC chairman Greg Medcraft said the regulator took the inquiry and its recommendations "very seriously", using it to "take a close look at how we do things and then act on all this to do a better job".

"We also note that some recommendations - such as registration of financial advisers, raising adviser standards, higher penalties and a user pays funding model - are issues ASIC has suggested in its submission to the Financial System Inquiry," he said.