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ASIC regulatory functions

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Ansley Chan

on 28 October 2013

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Transcript of ASIC regulatory functions

History of ASIC
1991 - Known as 'Australian Securities Commission' (ASC)
- Responsibilities: Corporate governance

1998 - Became 'Australian Securities and Investments
Commission' (ASIC)
- Added: - Superannuation
- Insurance companies
- Deposit-taking institutions (DTIs)

2010 - Added: - Trustee companies,
- Consumer credit & finance brokering
- Financial markets

Does ASIC have too many regulatory functions?
Main responsibilities:
To commence, regulate and take the overview of FOFA reforms

Licensing and compliance
Enforcement of the Corporations Act 2001
Regulates the conduct and disclosure obligations of financial services providers (including superannuation trustees that hold the AFS license)
The supervisor of the superannuation and insurance industry
Corporate regulator
1. Introduction

2. ASIC's regulatory functions
(a) Corporate regulator
(b) Financial services regulator
(c) Consumer credit regulator
(d) Financial markets regulator

3. Conclusion and recommendation
"He who governs least governs best"

- Thomas Jefferson
Financial services regulator


financial services businesses to ensure they operate efficiently, honestly and fairly
consumers against misleading or deceptive conduct affecting all financial products and services
Areas of regulation:
Superannuation, managed funds, shares and company securities, derivatives, and insurance
Financial services regulator
Financial services regulator
Overlaps: ASIC Vs APRA
Example 1: Superannuation industry
Comply with both ASIC's Australia Financial Services License
and APRA's Responsible Superannuation Scheme
licensing requirements

Financial data collected by trustees has to be provided to both regulator

Almost the identical structures of superannuation trust are regulated by ASIC and APRA

Superannuation trusts (regulated by APRA) and Investment Schemes (regulated by ASIC) operate under the same trust structure
Financial services regulator
Overlaps: ASIC Vs APRA
Example 2: Insurance industry
ASIC and APRA have similar but unclear regulatory roles for supervising insurance companies.

The collapse of the biggest insurance company in the AUS market in 2001 - 'HIH'

Ill-defined regulatory function between ASIC and APRA
"ASIC considered it had little direct responsibility in relation to prudential regulation of insurers and that was APRA's role... I cannot fault ASIC for assuming that position because it was a view APRA shared."
- Owen
Relating to the HIH case... ASIC or APRA?
Laws ASIC administers
1. Australian Securities and Investments Commisson Act
2. Corporations Act 2001
3. Business Names Registration Act 2001
4. Insurance Contracts Act 1984
5. Superannuation (Resolution of Complaints) Act 1993
6. Superannuation Industry (Supervision) Act 1993
7. Retirement Savings Accounts Act 1997
8. Life insurance Act 1995
9. National Consumer Credit Protection Act 2009
10. Medical Indemnity Act 2003
What does ASIC do?
Ensuring Australia's financial markets are fair and transparent
Promote confident and informed participants by investors in the financial system
Enforce and give effect to the law
Make information about companies and other bodies available to the public as soon as practicable.
To maintain, facilitate and improve the performance of the financial system and the entities in it by...
Financial markets regulator
To assess whether authorised financial markets are complying with their legal obligations to operate fairly, orderly and transperately
Advise the Minister about authorising new markets

On 1st August 2010, ASIC took over responsiblity to supervise and regulate the securities market (ASX) and its participants by the Federal government

ASX to ASIC...
Positive shift
Abandoning ASX's dual core (co-regulatory model) in favour delegating ASIC as the regulator:

Increasing power of regulatory function
Increase in efficiency and effectiveness
Cross market surveillance

Consumer credit regulator
To regulate people and businesses engaging in consumer credit activities
= Predominantly for personal, domestic and household purposes
'Credit activities'
= credit providers, credit services & assistance

Pre-July 2010 - Uniform Consumer Credit Code (UCCC)
Post-July 2010 - National Credit Code (NCC)
Consumer credit regulator
Purpose for the change:
Comprehensive licensing regime
Industry-wide responsible lending conduct requirements
Improve sanctions and enhances enforcement powers
Enhances consumer protection

Administrative powers:
Suspense or cancel a credit license
Making a banning order banning a person from engaging in credit activities
varying credit license conditions
Does the ASIC have too many regulatory functions?
Conclusion and recommendation
Centralised/nation-wide regulatory
Functions very interrelated
Prevent collapse of markets
Greater enforcement of law
Overlap in respsonsibilities
Scope of responsibilities is too wide
Specialise - focus on the core
Compliance cost too high - costs passed on to consumers

"He who governs least governs best."
- Thomas Jefferson

In our opinion...
Originally the only function of the ASC
Holds a registry of all corporations in Australia and issues ACN/ABNs
Requires all corporations in Australia to lodge financial statements and records.
ASIC has the powers to investigate breaches and insitute civil or criminal proceedings under this Act and others
What does the Corporations Act cover?
Registration of Companies
Membership and internal management
Financial reporting and disclosure
Financial services and markets
From 1993-1999, ASIC only brought 14 civil penalty applications relating to 10 cases

Following this period, ASIC has further used its powers to bring civil cases against companies and their directors for non-compliance

ASIC's role in relation to breaches of corporations act is generally an "oversight and enforcement body", therefore its ability to act before time are limited.
Group Members
Nelson York (3187869)
Ansley Chan (3289340)
Yang Yang (3443208)
Shan Yue Yun (3475634)
Xiao Ye (3325083)
Full transcript