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Chapter 1

Statutory oversight

Overview of current oversight priorities

1.1        The Parliamentary Joint Committee on Corporations and Financial Services ('the committee') was established by the Australian Securities and Investments Commission Act 2001 (the ASIC Act). Under Section 243 of the Act[1], it is to inquire into the performance of the Australian Securities and Investments Commission (ASIC) and to evaluate the operations of the Corporations Act and any legislation impinging on it.

1.2        This report is presented in response to the first of these responsibilities. In 2011 the committee raised the level of its active oversight of ASIC through holding four hearings annually. The hearings require ASIC officers to give evidence about the commission's execution of its duties. The committee also decided to expand its understanding through the use of independent expert witnesses to complement information coming from ASIC. The intent was that these witnesses could elucidate the context in which ASIC operates and offer different perspectives on the issues with which ASIC deals.

1.3        This report draws on evidence given by Dr George Gilligan from Monash University. The committee thanks him for his time and his valuable contribution to the oversight process. The committee is also grateful to ASIC officers who have responded with clarity and candour to the committee's questions and followed up on the committee's recommendations.

1.4        ASIC is the regulator of Australia’s corporate sector, markets and financial services and is responsible for monitoring the integrity of Australia's financial system. This includes the regulation of corporations, financial advisors and consumer credit providers, and supervision of trading on Australia's licensed equity, derivatives and futures markets. The commission may also advise the minister on changes required to address concerns with the operation of the corporations legislation or the financial products or financial services industry, or to improve the efficiency of the financial markets.[2]

1.5        The committee's key interest is whether ASIC is fulfilling its statutory responsibilities as the corporate, markets and financial services regulator. Section 1 of the ASIC Act directs ASIC to:

• maintain, facilitate and improve the performance of the financial system and the entities within that system in the interests of commercial certainty, reducing business costs, and the efficiency and development o the economy;
• promote the confident and informed participation of investors and consumers in the financial system;
• administer the laws that confer functions and powers on it effectively and with a minimum of procedural requirements;
• receive, process and store, efficiently and quickly, the information given to ASIC under the laws that confer functions and powers on it;
• ensure that information is available as soon as practicable for access by the public; and
• take whatever action it can take, and is necessary, in order to enforce and give effect to the laws of the Commonwealth that confer function and powers on it.

1.6        In its current oversight, the committee has focused on issues of financial crime and ensuring transparency of information in the financial services sector. Its concurrent inquiry into the collapse of Trio Capital has heightened its awareness of these matters and sharpened consideration of where ASIC can contribute to the minimisation of fraud and to equipping consumers of financial products to make wise investment decisions. Over the past year, the committee has been interested in the educational role of ASIC and the role of financial literacy to avert ill-informed investment decisions and vulnerability to fraudulent activities. This is a recurring theme in this report.

1.7        The committee's major concern is that investors have confidence in Australian financial markets so as to attract robust investment and creative economic activity from both large corporate players and the multitude of small businesses and private investors that underpin the sector.

Gathering evidence

1.8        This report records evidence given by Dr Gilligan and ASIC representatives at a public hearing on 25 November 2011 in Sydney. All witnesses are listed in Appendix 1. Copies of the Hansard transcripts from the hearings have been tabled for the information of the Parliament, and are available on the committee's website, www.aph.gov.au/Senate/committee/corporations_ctte/asic/index.htm

1.9        A number of questions were placed on notice at the hearings. The committee expresses its disappointment that ASIC did not meet the committee's request for responses to Questions on Notice within the agreed timeframe.

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