On 3 March, the AICD provided a submission to the Senate Economics References Committee on its inquiry into the capacity and capability of the Australia Securities and Investment Commission (ASIC) to undertake proportionate investigation and enforcement action (Inquiry).
The AICD submission noted that ASIC has a critical role as the regulator of Australia’s overall corporate governance, market integrity and financial services framework. The key points of our submission included:
- ASIC’s enforcement approach and activities have strengthened since the Hayne Royal Commission. However, there are structural limitations impacting ASIC that, if addressed, would enhance ASIC’s ability to meet its broad remit and expectations of the community, regulated population and government;
- Market integrity and disclosure are areas of the law where ASIC’s approach to enforcement and role as the conduct regulator could be better clarified and enhanced. In particular, breaches of continuous disclosure laws and misleading and deceptive conduct provisions (including emerging areas such as climate disclosures) as matters that involve significant public interest;
- The range of enforcement mechanisms available to ASIC are appropriate. Regulator discretion is essential to enable system-wide and specific policy and public interest considerations to be factored into enforcement. That said, an over-reliance on negotiated outcomes and in particular, infringement notices, at the expense of civil and criminal actions should be avoided where clarity on the law and visible deterrent effects are relevant considerations;
- ASIC’s remit is extensive and appears broader than any other similar conduct authority globally. ASIC’s workload has 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 and enforcement priorities; and
- Changes to ASIC’s governance structure could improve accountability, performance, culture and strategic oversight. The introduction of a board structure comprising a majority of non-executive, independent directors, including the existing ASIC Chair, could provide a clearer delineation between the Commission’s executive and non-executive responsibilities and help bring important external perspectives to the regulator.
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