The Australian Securities and Investments Commission (ASIC) is Australia’s integrated corporate, markets, financial services and consumer credit regulator, whose vision is for a “fair, strong and efficient financial system for all Australians.”
In its recently released 2019-23 Corporate Plan (“the Plan”) ASIC outlines how it aims to achieve that vision through its strategic change program and key priorities in combatting corporate and financial crime.
Changes on the horizon
ASIC’s strategic change program is designed to ensure that it has effective regulatory tools to achieve its vision, and involves implementing the Financial Services Royal Commission (Royal Commission) recommendations and reforms introduced by the Australian Government.
A key aspect of this program is the acceleration of enforcement, with ASIC creating a dedicated Office of Enforcement to centralise decision making and drive its ‘Why not litigate?’ operational discipline. This aggressive approach aims to address the community expectation that unlawful conduct should be punished and publicly denounced through the courts.
ASIC also plans to use tougher penalties to achieve better outcomes. For example, someone engaging in dishonest conduct in carrying on a financial services business can now face penalties of up to $525 million per contravention, and imprisonment of up to 15 years.
In conjunction with the implementation of the Royal Commission recommendations, ASIC is also transforming its corporate structure and governance. This includes:
- A new leadership structure
- Close and Continuous Monitoring supervisory approach (CCM) – involves ASIC teams spending time onsite with the five largest financial services institutions to engage with the firms on risk management and compliance culture
- Creation of a Corporate Governance Taskforce
- Developing ‘next generation’ regulatory tools (e.g. behavioural sciences, regulatory technology, data analytics)
Strategic priorities
ASIC’s program of change will help to support its strategic priorities, which will adapt to prevailing threats throughout the course of the plan.
ASIC’s focus for 2019–20 is on addressing five key drivers of harm to consumers and markets, through seven regulatory priorities.
Key drivers of harm
ASIC identified the five key drivers of harm as:
- Poor design and inappropriate sale of investment and protection products
- Inappropriate sale of credit products to consumers and limited access for small business
- Poor conduct in financial markets driven by lack of competition, structural challenges or conflicts of interest
- Poor governance (by boards, executives and investors), lack of professionalism, poor culture and lack of accountability
- Regulated entities are not deterred from misconduct by ASIC’s regulatory action
ASIC’s key priorities
ASIC’s 7 key strategic priorities for 2019-20 are as follows:
- High-deterrence enforcement action – prosecuting and ‘making an example’ of the most serious offenders to help deter financial and corporate crime
- Prioritising the recommendations and referrals from the Financial Services Royal Commission – includes supporting key law reforms to achieve recommendations
- Delivering as a conduct regulator for superannuation – becoming the primary regulator of conduct in superannuation, in line with the Royal Commission recommendations. Involves supervision and surveillance of superannuation trustees and taking regulatory/enforcement action.
- Addressing harms in insurance – involves taking regulatory/enforcement action against mis-selling, reviewing product features and practices that raise concerns, and supporting insurance law reforms.
- Improving governance and accountability – involves enhanced supervision of key firms (e.g. CCM program and Corporate Governance Taskforce), enforcement to hold individuals accountable for corporate governance failures that cause harm and supporting new laws to deter misconduct.
- Protecting vulnerable consumers – taking regulatory action against irresponsible actions by financial services providers towards consumers facing hardship
- Addressing poor financial advice outcomes – targeting misconduct and potential harm to consumers that may arise as a result of the industry’s shift towards ‘general advice’ models
Enhanced supervision and enforcement
Effective supervision and enforcement are key elements driving ASIC’s program of change and strategic priorities. In the next article, we investigate how ASIC is gearing up to increase its enforcement of corporate and financial crime.
