Chapter 1


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Chapter 1

Introduction

1.1        The Parliamentary Joint Committee on Corporations and Financial Services was established by the Australian Securities and Investments Commission Act 2001 (the ASIC Act). Section 243 of the ASIC Act specifies the committee's duties, which include:

(a) to inquire into, and to report to both Houses on:

the activities of the Australian Securities and Investments Commission (ASIC)...or matters connected with such activities, to which, in the Parliamentary Committee's opinion, the Parliament's attention should be directed...

1.2        This report is presented in execution of the committee's duty under paragraph 243(a)(i).

1.3        As the corporate, markets and financial services regulator, the Australian Securities and Investments Commission (ASIC) is responsible for monitoring the integrity of Australia's financial system. Areas within the Commission's remit include promoting financial literacy and consumer education; corporate, financial services and consumer credit regulation; and the supervision of trading on Australia's licensed equity derivatives and futures market.

1.4        In inquiring into ASIC's activities, the committee seeks to determine whether ASIC is fulfilling its statutory responsibilities. In considering ASIC's performance, the committee has regard to section 1 of the ASIC Act, which directs ASIC to:

  • maintain, facilitate and improve the performance of the financial system and entities within that system in the interests of commercial certainty, reducing business costs, and the efficiency and development of 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, 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 all necessary action to enforce and give effect to the laws of the Commonwealth that confer functions and powers on it.

The public hearing

1.5        The committee held two public hearings. The first was held on 15 March 2013 at the Wesley Conference Centre in Sydney. The committee took evidence from Ms Merran Kelsall, Chair of the Auditing and Assurance Standards Board, Ms Lynn Wood, Chair of the Financial Reporting Council, Ms Liz Stamford, Head of Audit Policy at the Institute of Chartered Accountants Australia, Mr Jim Murphy and Mr Bruce Paine, respectively the Executive Director, Markets Group, and Principal Adviser, Corporations and Capital Markets Division, at the Treasury. The committee then heard from ASIC officials, including the ASIC chairman, Mr Greg Medcraft. The second public hearing was held at Parliament House in Canberra on 21 March 2013, where the committee heard evidence from Mr Amir Ghandar, Policy Adviser for Audit and Assurance at CPA Australia.

1.6        This report principally reflects the evidence taken at the hearing. Witnesses who gave evidence are listed in Appendix 1. Copies of the Hansard transcript of the hearing have been tabled for the information of the Parliament, and are available on the committee's website.[1] Several questions were placed on notice. These questions, and the answers received, are published in Appendix 2 and are also available on the committee's website.

1.7        The committee thanks all the officials from the organisations represented at the hearings for their time and their contribution to the inquiry.

1.8        The committee foresees that it will be useful in the future to take evidence from industry representatives and the regulator together in a roundtable format, particularly around the various elements of audit quality.

Key issues and the structure of the report

1.9        This report deals with a range of matters that are of central concern to ASIC, of particular interest to the committee, and of wider debate and conjecture in the financial community.

1.10      The areas of discussion common to the organisations involved in the auditing industry and to ASIC are ASIC's ongoing concerns with the quality of auditing in Australia and overseas. These issues are covered in Chapter 2.

1.11      Chapter 3 focuses on 'dark pool' trading and high frequency trading. Chapter 3 of this report presents this evidence.

1.12      Chapter 4 looks at the Future of Financial Advice.

1.13      Chapter 5 covers the developments with Trio Capital, Storm Financial, Whitehaven Coal and Macquarie Entities, and proposals for regulatory reform in the debenture sector.

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