Financial and Corporate Regulation

The regulation of the financial and corporate sectors carries with it the problem of balancing investor protection against the burden of compliance costs to business, which might unduly stifle economic activity. The compliance burden on business resulting from government regulation was last examined in 2006 by the Taskforce on Reducing Regulatory Burdens on Business. Its report, Rethinking Regulation, made recommendations that covered aspects of the broad areas of economic, financial, social and environmental regulation. Several recommendations aimed to address the underlying causes of over-regulation, to improve regulation-making and to strengthen the regulation impact statements (RISs) required in all legislation.

To strengthen the adequacy of the RIS, the Office of Best Practice Regulation Office of Best Practice Regulationwas established within the Productivity Commission to act as the central point for ensuring best practice regulation.

An expanded role for the Australian Securities and Investment Commission?

The present structure for the regulation of the financial and corporate sectors by the Australian Prudential Regulatory Authority (APRA) and the Australian Security and Investment Commission was put in place on the recommendation of the 1997 Financial System Inquiry (FSI). The Financial Sector Advisory Council undertook a review of the outcomes of the FSI in 2003. In its report, the council commented that there was scope for the regulatory agencies to improve their exchange of information.

Rethinking Regulation made several recommendations that called for greater cooperation and coordination between APRA and ASIC to reduce the compliance burden on these two sectors. The Howard Government accepted a number of these recommendations, but they are yet to be implemented. An issue that may have to be considered by the 42^nd Parliament is whether ASIC and APRA should be merged.

Following the recent collapses of Fincorp, Westpoint and Australian Capital Reserve, the question has arisen whether ASIC should have a role in the licensing and registration of valuers under the Corporations Act 2001, as is the case with financial advisers. These collapses have been attributed partly to the overvaluation of assets. Valuers currently are regulated under various state and territory legislation. The Australian Labor Party’s policy on reducing red tape includes the objective of harmonising key regulations across jurisdictions that have an impact on business within five years. The issues described above may be included in that process.

Documentation
Kevin Rudd, ‘Facing the future’, address to the National Press Club, Parliament House, Canberra, 17 April 2007.