Government Senators' additional comments

1.1The Chair’s report, starting with recommendation 1, reduces significant evidence provided to the Inquiry in a complex area of regulation over the past almost two years to little more than a headline.

1.2The simplification of these complex issues detracts from the practical improvements to ASIC’s operation suggested by witnesses, and indeed by ASIC itself, throughout the Inquiry.

1.3So too does the call in recommendation 2 to separate ASIC’s functions into ‘a companies regulator and a separate financial conduct authority’.

1.4We note that ASIC’s wide remit has long been the subject of various inquiries and reviews, including and notably the Hayne Royal Commission and the previous FRAA review.[1] Evidence was indeed provided to this Inquiry that ASIC’s remit is broad, and that this is unique when compared to comparable regulators globally.

1.5Some evidence was received that the broad remit assists enforcement, and some evidence suggested it leads to ASIC being spread too thin.

1.6The Chair’s report does not further progress this longstanding debate, because it lacks detail on any potential model for separating the markets, corporations and financial services functions of the regulator, the timeframe over which this might occur, and the process to achieve it. It also does not properly weigh evidence presented to the inquiry in favour of ASIC's broad remit.

1.7Government Senators were provided just 24 hours to assess the Chair’s report and its recommendations but are, however, in agreement that there remains opportunity for improvement in ASIC’s operations and this is why we have chosen to write additional comments rather than a dissenting report.

1.8This Inquiry received various useful evidence and suggestions from a cross section of stakeholders that provide a genuine opportunity for ASIC to improve.[2]

1.9We thank the many witnesses and submitters who have shared their experiences and provided evidence to the Committee to contribute to improvements in our corporate regulator.

1.10Views from stakeholders who frequently interact with ASIC have largely been ignored in the Chair’s recommendations, which assume ASIC will be split without detailing how that could occur, and overlooks sensible reforms which could take place today.

1.11Consistently, witnesses and submitters informed the committee of their disappointment at being unsupported having made referrals of misconduct, because of the lack of response and information provided by ASIC.

1.12Coupled with the common misunderstanding that ASIC is a complaints-handling body, this lack of responsiveness has contributed to a significant perception problem that ASIC must address to build confidence in its capabilities.

1.13Government Senators agree that significant improvements are required to communicate with those who report allegations of misconduct, and we broadly support improvements suggested in the Chair’s Report at Recommendation 3 for ASIC to transparently report data on the handling of reports of alleged misconduct. This must be done in a manner that does not jeopardise ASIC's important investigation and litigation work. We do not consider this requires legislation.

1.14Based on the evidence received to this inquiry, we make a number of further points about practical enforcement improvements which are tangible and do not require wholesale changes to the operations and structures of ASIC to improve outcomes.

Some witnesses to the inquiry spoke highly of the effectiveness of ASIC’s work in taking a campaign approach to enforcement in its thematic reviews. The outcomes of thematic campaigns were particularly welcomed by consumer advocates, for example in relation to consumer credit providers.[3]

Government Senators encourage the expansion of thematic, campaign approaches to maximise enforcement outcomes.

In this vein, we also note evidence provided to the Inquiry supporting an enhanced role for professional associations in both providing intelligence about potential misconduct to their members, and in educating members on ASIC campaign themes as well. For example, the Financial Advice Association of Australia detailed member experiences making reports of unlicensed advisors, and suggested improved relationships with ASIC could help triage and elevate relevant misconduct reports.

Government Senators encourage ASIC to better utilise professional bodies within its remit in these ways.

Government Senators note that the organisational restructure to streamline decision-making and improve responses to misconduct took effect from July 2023.[4] This should be monitored for impact and outcomes.

1.15Government Senators further note that the duty of lifting standards and perceptions lies with ASIC leadership, including demonstrating the positive work they do and engaging meaningfully in their commitments to improve.

1.16The Chair’s report also canvasses a range of matters around internal governance matters at ASIC in the recent past, the role of litigation in achieving enforcement outcomes, protections for whistleblowers, and the ASIC funding model. Government Senators note that discussion of such matters contributes to public debate about the effectiveness of regulators.

1.17Finally, the Chair’s report calls for a new Statement of Expectations from the Government.

1.18Government Senators note that a new statement will be provided by the Treasurer,[5] and believe this Statement should give strong guidance for high standards of enforcement and consumer protection at ASIC.It should also consider emerging risks and opportunities, including those presented through the ongoing digital and net zero transformations.

Senator Jana Stewart

Member

Labor Senator for Victoria

Footnotes

[1]FRAA, Effectiveness and Capability Review of the Australian Securities and Investments Commission (ASIC) 2022.

[2]See for example: Consumer Groups Joint Submission, Submission 6, p. 1; Financial Services Council, Submission 7.

[3]Ms Stephanie Tonkin, CEO, Consumer Action Law Centre, Committee Hansard, 23 August 2023, p.51; Ms Fiona Gutherie, CEO, Financial Counselling Australia, Committee Hansard, 23 August 2023, p.54.

[4]ASIC, Supplementary submission 1.5, p. 4.

[5]Patrick Durkin, ‘Chalmers sets new expectations for ASIC’, The Australian Financial Review, https://www.afr.com/policy/economy/chalmers-sets-new-expectations-for-asic-20231121-p5eljr (1July 2024).