The Australian Securities and Investments Commission (ASIC) warns it will crack down on “delinquent culture”, and may set up a peer-review disciplinary panel for financial services.

“I’ve been talking about culture for a while now,” Chairman Greg Medcraft wrote in an opinion piece for Fairfax Media last week. “That is because it matters and is a big driver of conduct. Sadly, poor culture often means poor outcomes for consumers.”

The proposed “financial services industry disciplinary panel” would take action against senior executives who tolerate poor culture. It would comprise financial services experts and have the power to issue infringement notices for civil breaches.

“The significance of this cannot be underestimated – being judged by peers has major reputational consequences above and beyond any monetary impact,” Mr Medcraft said.

“And it avoids the expensive and time-consuming process of going to court.”

ASIC wants to work with businesses to help them create the right culture, including telling boards and management when its surveillance identifies cultural problems.

“Often it is not just an organisation’s few bad apples driving bad outcomes for consumers but the culture itself, often starting at the top,” Mr Medcraft said.

“It is no good always just pursuing the bad apples if the fundamental problem is the tree.”

ASIC already runs a peer review panel for possible breaches of market integrity rules – the Markets Disciplinary Panel – comprising current and former executives from broking businesses and investment banks.

A panel infringement notice can require offenders to pay fines, give up profits, participate in education programs or enter into enforceable undertakings.

Earlier this month Mr Medcraft warned financial services executives may face criminal and civil penalties if they create cultures that encourage employees to break the law.

ASIC has suggested broadening the Crimes Act’s culture provisions to the financial services and products provisions in the Corporations Act, extending them not just to companies but also responsible management.

Mr Medcraft says one recommendation from the UK’s recent Fair and Effective Markets Review was that businesses take greater responsibility for employees’ conduct. It also sought to reverse the “ethical drift” that has led to recent scandals.

In Australia, one way to shape culture is through peer pressure, he says. “When we find organisations that do not care that their delinquent culture is hurting consumers, then we must be firm and credibly deter this behaviour.”