ASIC

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The Australian Securities & Investments Commission (ASIC) is an independent Australian government body that acts as Australia's corporate regulator. ASIC's role is to enforce and regulate company and financial services laws to protect Australian consumers, investors and creditors. See also APRA.

Contents

Related legislation

ASIC administers the following legislation (or relevant parts of it), as well as relevant regulations made under it:

  • Corporations Act 2001
  • Australian Securities and Investments Commission Act 2001
  • Insurance Contracts Act 1984

History

ASIC was originally formed as the Australian Securities Commission (ASC), which came into being on 1 January 1991 in accordance with the ASIC Act 1989. The purpose of ASC was to unify corporate regulators around Australia by replacing the National Companies and Securities Commission and the Corporate Affairs offices of the states and territories.

The corporate regulator became the Australian Securities & Investments Commission (ASIC) on 1 July 1998, when it also became responsible for consumer protection in superannuation, insurance, deposit taking and, from 2002, credit.

The role of ASIC

In discharging this oversight function, ASIC has a clear direction and a clear set of priorities.

ASIC’s oversight function is defined in s1(2) of the ASIC Act which outlines 6 areas of responsibility. For convenience these can be grouped into two parts:

The first is real economy and financial markets infrastructure. This work refers to our role in registering companies, licensing businesses and a range of other information services we are required to provide.

Our clear direction here is ‘to deliver outstanding and cost effective service’ and we have set 2 clear priorities:

  • to lift operational effectiveness, and
  • to reduce costs by making greater use of technology.

The second is financial markets behaviour. Here our clear direction is ‘to exercise our powers to make a real (positive) difference in improving confidence in the integrity of our markets and protect investors and consumers’.

To guide that work, we have 4 clear priorities:

  • assist and protect retail investors and financial consumers
  • build confidence in the integrity of our financial markets
  • facilitate international capital flows in and out of Australia
  • manage the domestic and international implications of the GFC.

In pursuing the priorities in financial markets, we use tools ranging from discussions, compliance and surveillance to enforcement and law reform. The tools we use will depend on the particular circumstances. Enforcement or deterrence work, however, does remain ASIC’s primary tool to deter illegal market behaviour and punish wrongdoing.

We developed our approach (clear direction and priorities) following an extensive review that was completed in 2008 with external assistance. We recently subjected the organisation to a further internal and external review (a ‘health check’ if you like), which has confirmed that the direction and priorities are relevant and correct for ASIC.

Our priorities will—and should—evolve and change as market conditions change. For example, as the financial crisis recedes, our priority in that area will become less relevant. In addition, we are assessing a potential new priority for ASIC around small and medium sized enterprises and what additional assistance and services ASIC can provide. Our aim will be to keep compliance costs low and assist small business as creditors of companies which fail.

ASIC market integrity rules

The Corporations Amendment (Financial Market Supervision) Act 2010 provides for a new type of rule called market integrity rules. These rules are made by ASIC and apply to market operators, market participants, other prescribed entities and financial products traded on the relevant markets.

The following ASIC market integrity rules were made on 1 August 2010 and are based on legislation and regulations as at 1 August 2010. Our approach in making market integrity rules has been to not change the substance of the pre-existing obligations that apply to participants of the relevant markets at this time.

ASIC is responsible for supervising compliance with these rules.

We have also issued guidance on the market integrity rules: see Regulatory guides below.

ASIC market integrity rules

Regulatory guides

Consultation documents

ASIC to take over market supervision

ASIC welcomed the announcement today by the Minister for Financial Services, Superannuation and Corporate Law, the Hon Chris Bowen MP, of a 1 August 2010 start date for the transfer to ASIC of the market supervision role now being performed by the Australian Securities Exchange (ASX).

This follows the proclamation of the relevant Act and approval of the relevant regulations earlier today by the Executive Council.

The Minister also announced his intention to approve the Market Integrity Rules on which industry has been consulted. These rules, together with the amended ASX operating rules, which the Minister also announced he would allow, will form the regulatory rules for the new market supervision regime.

On Wednesday 7 July 2010, ASIC and ASX concluded an historic and formal agreement on the transfer of certain supervisory activities to ASIC. The agreement will underpin their continued cooperation in ensuring a seamless transition from ASX to ASIC on 1 August 2010 and their continued cooperation going forward.

ASIC Chairman Mr Tony D’Aloisio said, ‘We welcome the announcement that the transfer of supervision will commence on 1 August 2010. ASIC is ready to assume this important responsibility. We have an integrated market surveillance system in place and we have developed a streamlined markets analysis methodology and relationship management model. We have built and trained a quality Market & Participant Supervision team, consisting of ASIC talent and external people with specialist market experience. The team will be complemented by ASX surveillance staff that will transfer to ASIC on 1 August 2010.

ASIC administrative powers to enforce financial services legislation

ASIC has today released updated guidance on how it will use its administrative powers to enforce the financial services legislation, including its new markets supervisory powers.

ASIC has updated Regulatory Guide 98 Licensing: Administrative action against financial services providers (RG 98), which outlines how ASIC uses administrative remedies to enforce the compliance of Australian financial services (AFS) licensees - and their representatives - with the financial services legislation.

This updated version of RG 98 does not represent a substantive change to ASIC’s approach to using its administrative powers, but includes additional sections on ASIC’s new powers to supervise market participants. That is, for AFS licensees who are market participants - in addition to the general remedies - ASIC may also ask the Markets Disciplinary Panel (MDP) to issue an infringement notice.

Compliance with an infringement notice may involve the payment of a penalty, undertaking remedial measures, accepting sanctions or entering into an enforceable undertaking.

ASIC’s policy on the role and operation of the MDP is set out in Regulatory Guide 216 Markets Disciplinary Panel (RG 216).

While each matter is assessed on a case-by-case basis, the non-prescriptive factors and examples contained in RG 98 are intended to provide transparency as to how ASIC determines the most appropriate regulatory response in each case.

Background

ASIC has a range of remedies available to it under the financial services legislation, including taking criminal, civil or administrative action. ASIC’s administrative remedies include:

  • suspending or cancelling an AFS licence;
  • issuing an order banning a person from providing financial services (banning order), or;
  • accepting an enforceable undertaking as an alternative to other remedies, where ASIC considers it appropriate to do so; and
  • asking the MDP to issue an infringement notice.

RG 98 indicates the matters ASIC takes into account in determining whether administrative action is the most appropriate regulatory response.

It also provides some indicative guidance on the kinds of factors ASIC will consider when determining the length of a banning order, including examples of relevant misconduct for illustration.

New ASIC regulations


References


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