ASIC meets the ebusiness challenge headon ASIC

Saturday, 01 July 2000


    Technology policy consultant Jenny Green outlines some of ASIC's electronic law enforcement activities - and useful sources of information for consumers

    Business is undergoing a fundamental shift. Through the Internet, new organisations are developing, attracting investor support, penetrating markets and grabbing market share faster than ever. The role of intermediaries has also changed. Many consumers are now able to "deal direct", when shopping online for financial products, but at the same time, they are overwhelmed by previously unknown choices and information. The "new economy" offers myriad challenges and opportunities, not only for the financial services industry and consumers, but also for the government and regulators like ASIC. Just how are we meeting the challenges posed by e-commerce? Our major e-commerce strategies include:

      * educating consumers about the risks and pitfalls of investing in schemes promoted on the Internet without making the necessary checks

      * developing new enforcement and surveillance tools to track activity and identify sources on the Internet

      * developing policy and codes of conduct to facilitate e-business.

    Educating consumers Many consumers believe the dangerous myth that "if it's on the Internet, it must be legal and secure". Nothing could be further from the truth. We have various strategies to hammer our core message home to all consumers that they should thoroughly check out the scheme operators before pouring hard-earned dollars into investment schemes promoted on the Internet. They are described below: Our website offers consumers useful guidelines on looking after their money. The website gives free on-line access to:

      * search our OFFERlist for all fundraising disclosure documents like prospectuses, offer information statements and profile statements lodged with ASIC from 13 March 2000

      * register for our Company Alert service to receive e-mail notification when a company you are monitoring lodges a document with ASIC

      * search our Professional Registers to check whether the investment adviser or securities dealer, futures broker, futures dealer, or life insurance broker is licensed with ASIC. If they aren't, don't deal with them.

      * you can also search our Authorised Representatives Registers and Banned and Disqualified Registers.

    We also regularly release Consumer Alerts which tell consumers about, and warn them of any risks associated with such matters as online share trading, investment offers on the Internet, free share offers and investment advice on the Internet. Download your free copy of our publications, Don't Kiss Your Money Goodbye (a step by step guide to choosing the right financial adviser) and Super Decisions (a guide through the superannuation maze). Check out our Gull Awards - read and learn from true stories of scams, swindlers and their victims who lost money. On April Fool's Day in 1999, we launched a scam website, Millennium Bug Insurance, to educate consumers about the risks of investing on the Internet. The website offered a fake investment scheme. We wanted to highlight the willingness of people to invest in companies that they knew nothing about. Exposed in May, the joke succeeded in convincing more than 1400 people to ask for further investment information and 233 people to pledge over $4 million to the scheme.

    In January 2000, we released for comment a draft expanded Electronic Funds Transfer Code of Conduct (EFT Code). The existing code only covers ATM and EFTPOS transactions. We propose to expand the code to cover telephone and Internet banking and stored value products such as smartcards and digital cash, to give consumers additional protection. We aim to complete the final version of the code later this year.

    Enforcing the law Through our Electronic Enforcement Unit, we developed an in-house web automation tool which enables sites to be routinely reviewed against a predetermined risk criteria. Those sites at greatest risk of breaching the Corporations Law are then subject to further analysis. We also exploit web-based technologies including website and evidence capture tools, messaging and web analysis and web information design strategies. Perhaps not surprisingly, the type of misbehaviour on the Internet mirrors the scams and frauds of the offline world. Broadly, our enforcement and surveillance action targets the following areas:

      * investment advice given by persons online, either directly or in chat rooms, without an appropriate licence or with no consideration of the needs of investors receiving the advice

      * non-disclosure of commissions and potential conflicts of interest by securities advisers

      * the indiscriminate offering of securities around the Internet, or share hawking

      * dissemination of false and misleading information about securities on the Internet

      * creation of false markets, manipulation of prices or volumes, and insider trading as a result of information disseminated about securities on the Internet.

    Developing policy and codes of conduct Our work in preparing Policy Statements (PSs) is essential in helping interpret the legal requirements for e-commerce. Our policy focus is widening to cover not only securities, but also protection of consumers in financial services, including superannuation, insurance and deposit products. Key policies relating to e-commerce include:

    Policy StatementNoPurpose Electronic ProspectusesPS 107Allows the use of electronic prospectuses via the Internet or other computer media. Investment Advisory ServicesPS 118Sets out guidelines and enforcement policy for a person providing investment advice on the Internet. Offers of Securities on the InternetPS 141Aims to improve certainty for people who use the Internet for commercial transactions (in respect of the Corporations Law). It does not generally seek to regulate offers, invitations and advertisements that have no significant effect on consumers or markets in Australia. Electronic Applications and Dealer Personalised ApplicationsPS 150Sets out when ASIC will give relief from the Corporations Law so that electronic applications for securities need not use the forms or processes required for applications on paper forms.

    To complement policy and law, ASIC is also promoting codes of conduct as a means of promoting ethical behaviour in the online world (see EFT Code above).

    Find out more To find out more about the directions for e-commerce, the challenges for industry and consumers and the regulatory pitfalls, join us at ASIC's special one day conference E-commerce: The Future for Financial Services; insights for business and consumers at the Westin Hotel, Sydney on Tuesday, August 15. Conference program will cover:

      * Challenges for investment managers, superannuation funds, banks and insurers

      * How to build consumer confidence

      * Fair dealing in electronic transactions

      * Cyber-regulation: the international experience

      * Pitfalls and clickfalls: how to get it right

      * Online broking: is it working for investors? (ASIC has released its online broking report.)

      * How will electronic law enforcement affect you?

    Speakers include: Senator Ian Campbell; Jillian Segal, ASIC; Paul Twomey, NOIE; Matt Bekier, McKinseys; David Jonas, ETC; Stephen Coulter, Commonwealth Bank; Rod Atfield, Mercantile Mutual; Lynn Ralph, IFSA; Ouma Sananikone, Equitilink; Louise Sylvan, ACA; Mark Sneddon, Clayton Utz; Gregg Rowley, eSign; Elizabeth Montano, AUSTRAC; and Graham Greenleaf, University of NSW.

    At our early bird rate $450 covers registration, CD of conference materials, lunch and refreshments. Book now through or phone Josh Moyes 9911 2602 or Jenny Green 9911 2620 for information


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