AICD submission to the Financial Regulator Assessment Authority (FRAA) on ASIC’s effectiveness and capability review

Friday, 28 January 2022

On 28 January 2022, the AICD provided a submission to the Financial Regulator Assessment Authority (FRAA) to assist with its effectiveness and capability review of the Australian Securities and Investments Commission’s (ASIC).

The AICD strongly supported the objectives of the FRAA’s first assessment of ASIC. The review presents a valuable opportunity to consider ASIC’s overall effectiveness, and in particular, how ASIC uses its current governance and operational structure, resources and processes to carry out its strategic decision making, surveillance and licensing activities.

We note that an important element of ASIC’s mandate, such as enforcement, were beyond the scope of the review, and so we do not offer comment on those aspects.

The AICD submission to the FRAA made the following points:

  • ASIC’s mandate is clearly articulated, communicated and understood by its stakeholders. Its ability to deliver on this mandate and apply an effective framework for strategic prioritisation, planning and decision making could however be enhanced.
  • ASIC’s remit is extensive and appears broader than any other conduct authority globally. Its workload has only continued to expand since the Hayne Royal Commission with increased activity in corporate governance and market conduct issues. It is critical that ASIC’s resourcing and funding increases commensurately to account for the breadth and depth of its regulatory activities, including greater investment in data and technology solutions to ensure its systems and processes are fit for purpose.
  • The introduction of a corporate board structure comprising a majority of non-executive, independent directors, including the existing ASIC Chair, would enable a clearer delineation between the Commission’s existing executive and non-executive responsibilities.
  • The AICD supports ASIC’s surveillance of regulated entities and markets. It is a critical regulatory activity for ASIC and its thematic assessments into corporate governance practices of large listed entities undertaken by its Corporate Governance Taskforce provide valuable insights into the regulator’s view of better practice. Learnings from these assessments are applied widely by directors in all sectors. It is important that organisations are encouraged to continue participating in thematic reviews and are not deterred by perceptions this may lead to enforcement action.
  • The AICD has regular engagement with ASIC on key governance issues facing company directors. This two-way dialogue is constructive and allows learnings to be shared between our organisations with the common goal of maintaining strong corporate governance market practices. In recent times, bilateral engagement has facilitated a broad range of relief measures to assist companies navigate their governance requirements under COVID-19 pandemic conditions.
  • ASIC’s financial reporting surveillance and audit inspection program helps investors and consumers have confidence in the integrity of financial reporting and disclosure in directors’ reports and the Operating and Financial Review (OFR). However, directors and their advisors have concerns about how this program operates and is resourced. The AICD encouraged consideration of recommendations to address these concerns as part of the FRAA’s review.

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