Buy now, pay later pioneer Afterpay Touch Group Limited [ASX:APT] has experienced a decline recently after a change in management raised some important ethical questions.
At time of writing, the stock is down 2.22% sitting at $25.94. This is likely to be a brief lull however, as the stock has been fluctuating around this mark for some time.
The company has courted much controversy this year, after financial crimes regulator AUSTRAC began an investigation over Afterpay’s potential infractions of money laundering, and counter-terrorism financing laws. Unfortunately this occurred the same day the company completed a $317 million capital raising, leaving investors feeling blindsided.
Despite this the stock price has remained afloat. But will investors and consumers be able to accept the company’s latest hotly debated management decision?
The latest controversy
Michael Saadat, NSW’s former regional commissioner for the Australian Securities and Investments Commission (ASIC) has recently decided to make a career change into the private sector. Namely, into the troubled yet very lucrative Afterpay Touch Group.
In a move that has sparked much debate, Saadat has taken the role of director of public policy and regulatory affairs for Australia and New Zealand, and will commence his new role on 1 November this year.
This new position could potentially cause a conflict of interest as ASIC had been providing regulatory oversight on Afterpay for some time. As the Australian Financial Review (AFR) questions, will Sadaat be in direct contact with his former employees? And should he be involved in any lobbying discussions with ASIC?
However, as Saadat understands the rigorous regulatory framework that companies like Afterpay need to adhere to, he may also be able to provide the expertise they need to operate more ethically. As he told the AFR:
‘It’s really important for a growing organisation like Afterpay to proactively engage with its regulators in a mature and responsible way.
‘They have grown fast and they need to make sure they are keeping on top of all of the different issues.
‘It’s not a traditional financial services company; it’s a tech finance company, it’s an iPhone app — there’s so many things about it that are different. That means there will be challenges along the way and they need to grapple with them.’
What’s next for Afterpay?
The company will still need to answer questions about how they plan to handle consumers who are already in debt or financially irresponsible from using the service.
But overall, the positive buzz around Afterpay has kept its stock price on a steady incline.
Although the new appointment of Saadat presents ethical dilemmas now, if he is able to avoid partaking in any activities that present a conflict of interest, he may bring some positive influence to the company. It also shows the company is taking its regulatory conduct seriously, which is a good sign.
This is definitely a space to watch.
For Money Morning
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