Last week the government announced big increases in fines and goal terms for those who undertake sharemarket-related misconduct. But we also need bigger fines for those who deceive investors with misleading disclosure and a regulator more willing to impose them.

The British financial services regulator routinely fines those it regulates for breaches in disclosure that, in Australia, are mostly allowed to pass without meaningful consequences from our corporate watchdog. Take the case of Standard Life Assurance. It was fined more than $4 million by the British regulator for misleading investors about the risks that resulted in almost 100,000 people believing they were investing in a cash fund.

The Financial Services Authority (FSA) found Standard Life Assurance's marketing material was misleading. The material said the fund wholly invested in cash when it was invested in riskier floating-rate notes, including sub-prime mortgage-backed securities.

Investors in the Standard Life Assurance Fund lost 5 per cent of their capital in January 2009. Standard Life Assurance paid about $180 million into the fund to make good the loss.

Note that the firm made restitution to its investors before the FSA become involved. But the FSA, correctly, fined the company anyway. There are other instances of a financial services company doing something wrong and being slapped with a fine by the FSA, regardless of whether the offending party had made restitution.

Our regulator, the Australian Securities and Investments Commission (ASIC), should take note. The point of issuing big fines is that it acts as a costly deterrent and hits culprits where it hurts most. The approach taken by our regulator stands in stark contrast. In cases that are similar to that of Standard Life Assurance, fines are almost never sought or imposed.

Instead, what we usually see is a carefully crafted press release saying the firm has given ASIC an undertaking (perhaps a legally enforceable undertaking) to correct the problem and make restitution to investors.

Our regulator prefers the softly, softly approach. In Britain, the FSA thinks big fines have deterrence value. In announcing the fine on Standard Life Assurance, Margaret Cole, FSA director of enforcement and financial crime, said: "The FSA takes the issue of misleading financial promotions very seriously and the fine announced today demonstrates our commitment to the principle of credible deterrence."

ASIC has responsibility for disclosure matters under the Corporations Act. Investor protection is mostly built around clear and accurate disclosure. ASIC has the power to fine but mostly chooses not to.

The regulator argues it takes too much time to try to impose a fine and only delays the restitution to affected investors because the matter gets bogged down in legalities. But surely investors would be far better protected in the first place if those intent on doing the wrong thing were stopped early on. Why do you think companies such as Standard Life Assurance make immediate restitution, which is virtually unheard of in Australia?

Outside of actually helping themselves to investors' money and opening themselves up to criminal charges, financial services players in Australia know that the worst they can expect is some taxpayer-subsidised business coaching from the regulator on how they can do things better.

Fincorp was one of the best examples of how a financial services player has played cat and mouse with the regulator. Fincorp raised money directly from the public with ads that suggested its debentures were safe while either lending the money to property developers or to itself for property development.

Fincorp collapsed in 2007, leaving about 8000 retirees with losses of about $200 million. For several years from 2002, the regulator tried to force Fincorp to improve its disclosure on no less than six occasions, before it finally took the company to court. All the time, money was still pouring into Fincorp.

In the light of recent collapses that have cost retirees billions of dollars, the regulator recognises that it needs to better protect investors. Slapping offenders with large fines early on would do much to enhance investor protection.

jcollett@fairfax.com.au.