The Financial Services Council (FSC) wants the Australian Securities and Investments Commission (ASIC) to pull its finger out.

FSC representatives told a recent Parliamentary Committee that ASIC should become more proactive, to avoid adverse events in the financial planning industry instead of reacting once they have occurred.

The FSC says ASIC has fallen short in its role to enforce laws on financial planners.

The arguments were made in a submission to the Senate Economics Legislation Committee Inquiry into the Scrutiny of Finance Advice.

In it, the FSC also urged a more stringent screening process be set up for the granting of Australian Financial Services Licenses (AFSLs).

The new process would include a “fit and proper person” test.

The lobby says that legislative and regulatory reform, including the Future of Financial Advice (FOFA) changes, is useless if it is not properly enforced.

“This requires prompt and efficient action by ASIC to investigate and enforce breaches of law,” the submission said.

“This is critical for the prevention of misleading advice and prevention of breaches of law generally.”

“ASIC's role is to enforce the law. There are numerous examples where the law has not been properly enforced,” it said.

The FSC submission also advocated tests to prove that a potential financial adviser or operators of financial advice businesses are of good character, adequately skilled and have adequate financial resources.

“Rather than ASIC acting after the event to intervene, the FSC proposes that ASIC adopt a more stringent approach to new applicants to ensure that only those of good character, who are adequately skilled, have adequate financial resources and can effectively discharge their legal obligations are granted a license to operate,” it said.

The inquiry continues.