It has recently been reported that financial regulator the Australian Securities and Investments Commission (ASIC) wishes to apply warning labels, not unlike those seen on cigarette packets, to various financial products.
Investor warnings could be slapped on a host of complex and risky financial products in the same way as the graphic warnings on cigarette packets, under new safeguards being considered by the corporate regulator. … ASIC could use the power to impose conditions on risky investment products such as restricting access for self-managed super funds, requiring retail investors to obtain financial advice before they could invest or slapping warnings on product disclosure statements and prospectuses for example telling investors, “Your capital is at risk”.
This kind of proposal, when bureaucrats elect to involve themselves in consumer calculations about the balance between risk and return, is plainly inconsistent with a liberal society in which we are meant to lean toward dignifying people with the capacity to make their own financial choices.
In this case, ASIC would privilege themselves with standing in for consumers when making decisions balancing the costs and benefits (as filtered by risk-return considerations) when purchasing certain financial products. This substitution of political for individual decision making is, if nothing else, particularly elitist in its character.
Another concern would be that consumers might well elect to take government recommendations about risk assessments at face value, depriving themselves of learning opportunities about what financial product configurations best suit their needs.
As Chris Berg noted in his book, The Growth of Australia’s Regulatory State, the trouble with mega-regulators such as ASIC is that they see very few limits to their regulatory domain and this leads to undue costs imposed upon the productive economy.
When ‘everything is on the table’ in policy terms is the time many illiberal ideas come out into the open. Let’s hope Treasurer Scott Morrison has the energy and foresight to prevent ASIC indulging any further with this particularly illiberal idea.