Login
ISCOVER
Disclosure often fails to protect consumers because many are too lazy to read the documents or can’t understand them, according to ASIC.
Commissioner John Price said one of the lessons that had been learnt since the Wallis Inquiry in 1997 was that disclosure often failed to prevent financial failures.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
“People may not have the time, inclination or capacity to read disclosure documents,” he told the Corporate Governance Forum yesterday.
“Research in behavioural economics also indicates that consumers are not rational in their decision making.
“This may mean people will not read disclosure documents, or misunderstand them if they do.”
FBAA chief executive Peter White recently said weighty disclosure documents were harming borrowers because they were often too overwhelmed to read them.
Meanwhile, Mr Price said another lesson ASIC had learned since the Wallis Inquiry was that conflicts of interest can lead to financial failures.
“This meant consumer misunderstandings could be exploited for the benefit of the financial services provider,” he said.
“A particular example of this is the conflicted remuneration structures that were typical in financial advice businesses for a long time.”
Mr Price said another factor common to many financial failures was that consumers had misunderstood the level of risk they were assuming or had taken on too much risk.
