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ASIC Self-Assessment Report offers significant insight into 2017 regulatory priorities

03 February 2017 | Australia
Legal Briefings – By Michael Vrisakis and Alison Wheatley

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Commonwealth regulator ASIC have given insight into their core regulatory priorities for 2017 and beyond, with the release of its self-assessment report for 2015-16 (Report). 

The Report, released on 27 January 2017, outlines ASIC’s emphasis upon RegTech investment for data analytics, honing its new communications strategy and maintaining accountability whilst fortifying its intervention powers, including through the proposed product intervention power, promise to provide significant challenges and opportunities for the financial services industry in the year ahead.

The regulator is required to prepare the Report under the Government’s ‘Cutting Red Tape’ regulatory reform initiative, which came into effect on 1 July 2015. As a Commonwealth regulator, ASIC was required to measure itself against six common key performance indicators (KPIs).

They are:

  1. Regulators do not unnecessarily impede the efficient operation of regulated entities
  2. Communication with regulated entities is clear, targeted and effective
  3. Actions undertaken by regulators are proportionate to the regulatory risk being managed
  4. Compliance and monitoring approaches are streamlined and coordinated
  5. Regulators are open and transparent in their dealings with regulated entities
  6. Regulators actively contribute to continuous improvement of regulatory frameworks

ASIC rated its overall commitment to achieving all six KPIs as ‘strong’, but noted that there were ‘some issues for improvement’. Further, ASIC reiterated its commitment to seeking out and responding to stakeholder feedback. In the Report, ASIC also specifically responded to feedback from five organisations who offered comments. Respondents considered that ASIC’s self-assessment was, on the whole, reasonable and objective, but did propose some constructive criticism of the current strength of ASIC’s communication with regulated entities and cooperation with other regulators.

Measuring its performance against the KPIs

KPI 1: Regulators do not unnecessarily impede the efficient operation of regulated entities

  • ASIC emphasised its belief that an understanding of the markets it is regulating is of vital importance in reducing unnecessary cost and compliance burdens on regulated entities. After the recommendations of the ASIC Capability Review, ASIC flagged future steps towards taking a more ‘outcomes-focused and dynamic’ use of advisory panels to achieve depth of market understanding. This may present a significant opportunity for industry experts and insiders to build relationships with ASIC.
  • Notably, the Report reveals that in 2015–16, ASIC received 1,982 applications for relief. Of those, they made 1,251 decisions to ‘cut red tape’ by granting relief.

KPI 2: Communication with regulated entities is clear, targeted and effective

  • ASIC directed focus towards its ongoing issuance of ‘clear guidance’ to regulated entities in the form of regulatory guides, information sheets and other communications. The Report also emphasises the valuable service provided to Australians through the Customer Contact Centre, a consumer hotline, and the success of its Complaint Management Framework, implemented in late 2015.
  • However, ASIC revealed that a new communications strategy is currently being developed, which will emphasise ASIC’s priorities, expectations and risk tolerances. The regulator will seek to communicate through a wider range of communication channels. The Report did not clarify which specific channels this strategy might encompass.

KPI 3: Actions undertaken by regulators are proportionate to the regulatory risk being managed

  • The Report highlights ASIC’s belief that its proactive and reactive ‘risk-based surveillance tool’ has enabled its market supervision and consumer education activities to be ‘in line with, or at the forefront of, global best practice’. ASIC notes its ongoing commitment to transparency in its enforcement practices (such as in Information Sheet 151, which explains ASIC’s approach to enforcement), as well as consulting with stakeholders about new regulatory issues and current market failures, including regulating digital financial advice.
  • ASIC will also respond to the Government’s forthcoming updated Statement of Expectations with a detailed Statement of Intent, which will provide further insight into ASIC’s future strategic direction.

KPI 4: Compliance and monitoring approaches are streamlined and coordinated

  • ASIC’s position is that it has demonstrated strong commitment to achieving this KPI through its cooperation with other domestic and international regulators.
  • With the assistance of boosted Government funding in 2017, ASIC will seek to invest in the development of big-data regulatory technology (RegTech) analysis in order to bolster its data analytic capabilities. The OneASIC (FAST 2) infrastructure overhaul program and the Market Analysis Intelligence systems are two such RegTech investments.
  • Notably, the Report strongly reiterates ASIC’s commitment to using its compulsory information-gathering powers with ‘proper purpose’, seeking to ‘limit the burden and intrusion’ on regulated entities and utilise safeguards to avoid misuse.

KPI 5: Regulators are open and transparent in their dealings with regulated entities

  • ASIC considers that its communications with stakeholders through its publications (including its Corporate Plan, reports and consultation papers, and its annual report), stakeholder surveys, the ASIC Capability Review, the Senate inquiry and the Financial System Inquiry demonstrate its commitment to transparency. ASIC’s new communications strategy, due to be finalised in late 2016, appears set to play a key role in ASIC’s commitment to transparency.

KPI 6: Regulators actively contribute to continuous improvement of regulatory frameworks

  • ASIC seeks to continually improve by promoting public discussion of market and regulatory developments. It cites its Annual Forum, which was attended by 586 delegates in March 2016, and seeking stakeholder feedback as examples of such discussion. Further, ASIC notes its Treasury liaison meetings and advice provided to parliamentary inquiries as evidence of its commitment to strategic discussions and furthering key policy initiatives.

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