ASIC's 2015–16 annual report
4.1
This
chapter discusses the 2015–16 annual report of ASIC. Under Senate Standing
Order 25(20),1 annual reports of bodies established under the ASIC Act are
subject to scrutiny by the Senate Economics Legislation Committee which noted
the following in relation to ASIC's 2015–16 annual report:
-
ASIC's strong
performance in two key areas: financial literacy and enforcement;2
-
ASIC's primary role as
a law enforcement agency, with 70 per cent of ASIC's regulatory resources
allocated to surveillance and enforcement;3
-
ASIC's enforcement
achievements including:
-
22 criminal convictions;
-
$210.5 million in
compensation and remediation for investors and consumers;
-
$1.3 million in civil
penalties; and
-
$2.3 million in
infringement notices (109 notices issued).4
-
ASIC's full engagement
with the capability review in July 2015 as a result of the Financial Services
Inquiry (FSI);5
-
the
government's commitment to provide an additional $121.3 million in funding for
ASIC to implement ASIC's responses to the recommendations of the FSI;6 and
-
the government's 2017
review of ASIC's enforcement regime for which a report is expected to be
presented later in 2017.7
4.2
The Senate Economics
Legislation Committee considered that ASIC met its reporting obligations and the annual report is apparently satisfactory.8 Therefore, in conducting its review of the ASIC 2015–16
annual report, the committee will focus on the statutory requirements under the
ASIC Act and other operational matters.
Statutory requirements
4.3
Statutory requirements
for the ASIC annual report are set out in section 136 of the ASIC Act and
Section 46 of the Public Governance, Performance and Accountability Act 2013
(PGPA Act) cover tabling, distribution and the contents of the annual report.
Tabling and distribution
4.4
The 2015–16 ASIC annual
report was provided to the Minister on 14 October 2016, and was presented out
of sitting on 31 October 2016. As a result, the legislative requirements as set
out below were satisfied:
-
Section 46(1), PGPA
Act: After the end of each reporting period for a Commonwealth entity, the
accountable authority of the entity must prepare and give an annual report to
the entity's responsible Minister, for presentation to the Parliament, on the
entity's activities during the period; and
-
Section 46(2), PGPA
Act: The annual report must be given to the responsible Minister by: the 15th
day of the fourth month after the end of the reporting period for the entity;
or the end of any further period granted under subsection 34C(5) of the Acts
Interpretation Act 1901.
4.5
Section 136(4) of the
ASIC Act requires that 'the Minister must cause a copy of each annual report to
be sent to the Attorney-General of each State and Territory as soon as
practical after the Minister receives the report'. ASIC informed the committee
that as at 25 November
2016 the 2015–16
annual report has been provided
to the Minister so that the
report could be provided to the Attorney-General of each State and Territory.9
Contents of the
annual report
4.6
In
addition to the requirements for annual reports as approved by the Joint
Committee of Public Accounts and Audit, ASIC is subject to statutory
requirements for the contents of the ASIC annual report as set out in sections
136(1)(a–e) and 136(2A) of the ASIC Act. It should be noted that changes to
section 136(1) and 136(2) of the ASIC Act were imposed by the Public
Governance and Resources Legislation Amendment Act (No. 1) 2015 which
sought to align annual report requirements, where possible, with the PGPA Act.10
Table 4.1
lists where in the 2015–16 ASIC annual report the current requirements in the
ASIC Act are met.
Table 4.1: Statutory
requirements for the ASIC annual report
Section |
Reporting requirement
(ASIC Act) |
2015–16 Annual Report |
136(1)(a) |
Exercise of ASIC's powers under Part 15 of the Retirement
Savings Accounts Act 1997 and under Part 29 of the Superannuation
Industry (Supervision) Act 1993 |
Page 188 |
136(1)(b) |
ASIC's monitoring and promotion of market integrity
and consumer protection |
Pages 22–25
Pages 30–81 |
136(1)(c) |
In relation to ASIC's functions under subsection
11(14), and each agreement or arrangement entered into by ASIC under that
subsection, information about the activities that ASIC has undertaken during
the period in accordance with that agreement or arrangement |
Page 188 |
136(1)(d) |
Operation of
the Business Names Registration Act 2011 |
Pages 83–87 |
136(1)(e) 136(2)(a) |
Information relating to the exercise by ASIC,
members of ASIC, or staff members, of prescribed information- gathering
powers. |
Pages 194–195 |
Operational matters identified
in the annual report.
4.7
ASIC has retained three
strategic priorities and the 2015–16 annual report is structured according to
achievements in these three areas. These are as follows:
-
Investor and consumer
trust and confidence.11
-
Fair and efficient markets.12
-
Efficient registration
services.13
4.8
The
government has committed $127.3 million over the next four years to implement
recommendations from the ASIC Capability Review and the FSI.14
From this
amount $121.3 million has been allocated to ASIC. ASIC received these funds
once the relevant appropriation Bill passed both houses of Parliament on 7
November 2016.15 As noted in the annual report ASIC will spend the funds in the
following ways:
- $61.1 million to
increase data analytics capabilities, including updating the data management
system and increasing surveillance capabilities;
-
$57 million to increase
enforcement and surveillance activities with a focus on financial advice,
responsible lending, life insurance and breach reporting; and
-
$3.2 million to
facilitate the accelerated implementation of key FSI recommendations.16
4.9
On 20
April 2016 the government announced an industry funding model for ASIC in
response to a key recommendation of the FSI. ASIC notes in the 2015–16 annual
report that this model will allow for alignment between ASIC's regulatory
costs and those in the industry that create the need for regulatory activities.17
The industry
funding model will also provide ASIC with greater certainty of funding and
resources. ASIC notes that it is to work closely with the Treasury and industry
in establishing the industry model before its
commencement.18
4.10
The
committee notes that on 30 March 2017 the ASIC
Supervisory Cost Recovery Levy Bill 2017 and related bills necessary to
implement an industry funding model for ASIC were introduced in Parliament.19 On 4 May 2017 draft regulations were released by the
Treasury for stakeholder views.20 Submissions
regarding the regulations close on Friday 26 May 2017.21 The committee will continue to monitor how the regulations
are to work in practice in assisting ASIC in recovering revenue.
Enforcement
4.11
During
the reporting period 685 enforcement outcomes were achieved, including criminal
and civil litigation and administrative action.22 This was an increase on
the 631 enforcement outcomes in 2014–15.23 The annual report
enforcement outcome data shows an increase in:
-
Civil litigations
successfully completed in relation to the priority of fair and efficient markets;24
-
people and companies
banned from financial services and credit services;25 and
-
compensation or
remediation under the priority of investor and consumer trust and confidence.26
4.12
In contrast, the
enforcement outcome data shows a decrease in:
-
civil penalties under
the priority of investor and consumer trust and confidence;27
-
the number of
infringement notices issued under the priority of investor and consumer trust
and confidence;28 and
-
compensation or
remediation provided under the priority of fair and efficient markets.29
4.13
The
2015–16 annual report notes that the number of investigations commenced under
the priority of investor and consumer trust and confidence increased while
investigations commenced under the priority of fair and efficient markets
decreased.30 The number of investigations completed under both priorities
decreased.31
4.14
During the reporting
period ASIC published two six-monthly reports on enforcement statistics. The
reports focussed on key themes that have been identified from the enforcement
data for the preceding periods.32
4.15
ASIC also commenced a
number of actions against banks. Actions from August to November 2016 are
summarised in Table 4.2 below.
Table
4.2- Statutory requirements for the ASIC annual report33
Date and ASIC media release No. |
Banks and lenders |
Fine |
Refund |
No. Customers |
Issues |
2016.08.24
16-271 |
Macquarie
IM |
$0.4m |
|
|
Failure to exercise due care and diligence |
2016.09.02
16-289 |
Commsec |
$0.7m |
$1.1m |
25 000 |
Lack of crossing and principal disclosure in trading pools |
2016.09.05
16-291 |
ANZ |
|
$29.0m |
393 000 |
Unclear fee disclosures on periodic payments |
2016.09.07
16-296 |
ING Bank |
|
$5.4m |
24 500 |
Misleading statements on costs and fees |
2016.09.07
16-297 |
Morgan Stanley |
$0.12m |
|
|
Failure to undertake monthly account reconciliation |
2016.09.08
16-298 |
Westpac |
|
$20.0m |
820 000 |
Failure to disclose credit card foreign transaction fees |
2016.09.12
16-304 |
Westpac |
|
$9.2m |
161 414 |
Failure to apply eligible fee waivers |
2016.09.14
16-308 |
CBA |
$0.18m |
$2.5m |
10 729 |
Breaches of responsible lending from 2011 to 2015. |
2016.10.27
16-365 |
ANZ CBA NAB AMP Westpac |
|
$178m |
202 000 |
Advice fees for no service |
2016.11.09
16-380 |
Cash Converters |
$1.35m |
$10.8m |
118 000 |
Irresponsible lending |
2016.11.16
16-389 |
Commsec |
$0.2m |
|
1 |
59 unauthorised transactions on the account of a deceased client over a six month period |
4.16
The committee notes the
work done by ASIC against banks over a period of four months and will continue
to monitor its actions in relation to this.
4.17
ASIC
informed the committee that it is currently undertaking the first test case on
the best interest duty in relation to financial advisers under the Corporations
Act.34 ASIC was unable to provide specific information to the
committee due to the matter currently being heard by the courts. ASIC informed
the committee that it would provide an update on the test case at a later date.35
The committee
will continue to monitor the outcomes of the test case once the court process
has reached a point where discussion can be had on the matter.
4.18
In
response to the legal action taken by ASIC against Mariner Corporation Limited
in April 2014,36 the committee recommended that the government consider ASIC's
suggestions for the reform of section 631 of the Corporations Act.37
The government
responded with agreement in principle to this recommendation and informed the
committee that it would consider the recommendation when other substantial
reforms to take-over laws are considered by the government.38
The committee will continue to monitor the
government's consideration of the recommendation.
Enforcement
review
4.19
On 19
October 2016 a taskforce was announced to review the enforcement regime of
ASIC.39 The taskforce chaired by the Treasury, will consist of a panel
of senior representatives from ASIC, the Attorney-General's Department and the
Office of the Commonwealth Director of Public Prosecutions. The panel will be
supported by an expert group and a reference group of stakeholders. The
taskforce is expected to report to the government in 2017. The terms of
reference for the taskforce and the list of persons in the expert group can be
located on the Treasury website.40
Surveillance
4.20
The
2015–16 annual report indicates that the number of high-intensity surveillances
completed by ASIC increased during the reporting period. Across the priority of
investor and consumer trust and confidence and the priority of fair and
efficient markets, 1441 high-intensity surveillances were undertaken in
2015–16.41 This in an increase from 1016 in 2014–15.42
4.21
The
2015–16 annual report notes that ASIC's surveillance during the reporting
period was proactive, risk-based and focused on areas such as vertically
integrated businesses in the funds management industry, funeral insurance,
financial benchmarks, retail over –the-counter derivative trading and auditors
and registered liquidators.43 In 2015–16 ASIC's wealth management
project utilised risk-based surveillance to focus on a range of misconduct,
including the quality of advice in large, vertically integrated institutions.44
ASIC notes
that it achieved significant regulatory outcomes against licensees and advisers
over the life of the project. One such
achievement was the banning of 14 advisors from the financial services industry
either permanently or for a period of time.45
4.22
Surveillance
by ASIC also targeted insolvency practitioners with 27 high- intensity
surveillances taking place.46 The 2015–16 annual report notes ASIC's
concerns regarding the largely unlicensed and unregulated nature of
the pre-insolvency advice market.
ASIC raised concerns over how some advisers may 'aid and abet directors in
breaching their duties and promote illegal phoenix activity that undermines
market confidence and reduces the assets that might otherwise be available for
creditors in a formal external administration'.47 ASIC referred to market intelligence from registered
liquidators to better understand phoenix activity as well as conducting
investigations and working with other regulators such as the Fair Work
Ombudsman, the Australian Financial Security Authority and the Phoenix
Taskforce.48
4.23
In
relation to the pre-insolvency advice market and the role it plays in
encouraging phoenix activity, the committee asked ASIC about the fluctuation in
the number of companies identified over the years as having the potential to
conduct illegal phoenixing; 6223 to 2072 to 11 494 across 2013–14, 2014–15 and
2015–16 respectively.49 ASIC informed the committee that the fluctuations are
due to a number of reasons, one of which is the nature of surveillance programs
ASIC is running.50 The committee encourages ASIC to provide further
information in future annual reports about the reasons behind the fluctuation
in the number of companies with the potential to conduct illegal phoenix activities.
4.24
The
2015–16 annual report indicates that the number of financial markets has grown
from approximately 18 in 2012–13 to 52 in 2015–16.51 The majority of the growth
has been in authorised, but unlicensed financial markets.52
The annual
report indicates that licensed financial markets are subject to surveillance
every year while authorised unlicensed markets receive reactive surveillance.53
4.25
The
committee raised questions about these authorised but unlicensed markets,
particular in relation to the amount of surveillance undertaken, why unlicensed
markets are monitored differently from licenced markets and how Parliament can
be assured that unlicensed markets are operating with integrity.54
4.26
ASIC
informed the committee that licensed and unlicensed markets exist due to the
absence of a tiered market framework.55 Unlike almost every other developed
financial centre, Australia has only one type of financial license which is
modelled on the traditional exchange type market.56 This means that the Australian market licensing regime cannot
accommodate other types of facilities for professional investors. As such some markets can be exempt
from obtaining a licence under
Part 7.2 of the Corporations Act.
The exemptions are subject to conditions to address any risks that may be
created by these markets.57 Conditions
include that users are only professional investors and that products traded on
exempt markets are not usually traded on licensed markets.58
4.27
ASIC
also informed the committee that the level of supervision differs for
unlicensed markets as ASIC's regulatory powers are different for such markets.
ASIC has advised the government of the desirability of law reform that would
allow unlicensed markets to become licenced markets through a tiered system and
subject to more detailed regulatory oversight by ASIC.59
4.28
The committee notes
ASIC response to issues regarding authorised unlicensed markets. The committee
will monitor ASIC's and the Treasury's work in relation to regulatory
arrangements for unlicensed markets, including its efforts to progress any law reform.
Market
cleanliness
4.29
The
2015–16 annual report notes that during the reporting period ASIC developed a
new measure of equity market cleanliness.60 This was based on analysis
of 'anomalous trading ahead of material, price-sensitive announcements' with a
focus on insider trading and information leaks.61 The measure demonstrated
that since the transfer of market supervision to ASIC in 2010 the Australian
equities markets have shown an increase in market cleanliness.62
ASIC released
its report on equity market cleanliness in August 2016.63
4.30
The
committee asked ASIC whether a similar measure could be implemented for areas
outside of equity markets such as loans, life insurance and financial advice.64
ASIC notified
the committee that a measure of equity market cleanliness was developed due to
the rich data available.65 As this level of data may not be
available in other sectors, a similar
measure of cleanliness may not be able to be developed.66 However depending on the data available, loan delinquency and broad
failures in relation to various classes of insurance could have a measure of
cleanliness like the one established for equity markets.67
4.31
ASIC is
also considering cleanliness indicators for retail credit markets that are
within ASIC's jurisdiction. ASIC notes that there is a high level of loan data
on loan defaults that is available from different sources, some of which would
assist in being an indicator for cleanliness.68
4.32
ASIC
notes that in relation to other sectors such as life insurance and financial
advice, public reporting and surveillance provide the necessary data to
indicate the level of compliance within those sectors without the need for a
measure of cleanliness.69
4.33
The committee will
continue to monitor ASIC's work on market cleanliness measures.
Relief applications
4.34
During
the reporting period ASIC received 1982 applications or waivers for relief from
individual entities, out of which relief was granted for 1251 applications.70
This was a
decrease from the 2014–15 period where 2157 number of applications were
received, out of which relief was granted for 1473 applications.71
The 2015–16
annual report does not elaborate on the decrease between the reporting periods.
4.35
ASIC
informed the committee that it is not possible to determine how many waivers
for individual entities are currently in effect.72 ASIC also informed the
committee that such waivers for individual entities are not subject to
parliamentary disallowance and that consumers are notified about individual
relief instruments through the ASIC gazette.73
4.36
The committee
encourages ASIC to provide information in future annual reports regarding how
many applications or waivers are in effect and to consider more accessible ways
for consumers to obtain information on published individual relief instruments
outside of the ASIC Gazette.
Recommendation 1
4.37
The committee
recommends that ASIC investigate the feasibility of establishing a searchable public
register containing information on the applications or waivers for relief
currently in effect as well as indicative information for consumers regarding
how they might be affected.
International cooperation
4.38
The
2015–16 annual report notes that due to increasingly integrated, complex and
competitive global financial markets, an international coordination effort is required.74 In response to this ASIC
formed relationships with international regulators through memberships and
participation in bodies such as International Organization of Securities
Commissions, the International Association of Insurance Supervisors and
FincoNet, the International Financial Consumer Protection Organisation.75
4.39
During
the reporting period, ASIC made 362 international cooperation requests and
received 398 requests.76 This demonstrates an increase of 32
requests made and a decrease of 26 requests received.77 As noted in the 2015–16
annual report, 92 of the requests made to ASIC during the reporting period
related to enforcement matters.78 To further facilitate efforts in
international regulation and enforcement, ASIC entered into two memorandums of
understanding with various services and commissions in the United Kingdom and Singapore.79
4.40
ASIC
notes in the 2015–16 annual report that it jointly led a new initiative to
establish an Asia-Pacific Regional Supervisory College Forum.80
This
initiative is designed to improve cooperation and information sharing efforts
in the Asia-Pacific region in relation to targeted financial groups that have
regional importance. Members of this forum belong to various services and
commissions in the Asia-Pacific region.81
4.41
Between
2015–16 ASIC also continued to work on the Asia Region Funds Passport, with
ASIC and other services and commissions in the Asia-Pacific region signing a
memorandum of cooperation.82 The project aims to establish a
multilateral framework to assist with cross border marketing of managed funds
across participating economies in the Asian region.83
4.42
The committee
encourages ASIC to provide further information in future annual reports on the
capacity of ASIC to recover costs in these areas of international cooperation.
The committee will continue to monitor ASIC's work regarding managed funds and
the regulation of such funds across borders.
ASIC registry
4.43
In May
2015 the government announced a competitive tender process to 'test the
capacity of a private sector operator to upgrade and operate the ASIC
registry'; the companies register, the Business Names register and other
corporate and professional registers.84 On 19 December 2016 after the
evaluation of the final bids, the government announced that it would not to
engage a private operator for the ASIC registry at this time.85
4.44
ASIC's
annual report notes that during 2015–16 the ASIC registers were searched 90.7
million times, over 240 000 new companies were registered and 333 413
business names were registered.86 This in an increase from previous years.87
4.45
The
annual report notes that in 2015–16, 196 Self-Managed Super Fund (SMSF)
auditors were registered and 197 SMSF auditors were deregistered.88
The number of
registered SMSF auditors has increased compared to the 123 registration in
2014–15.89 However, the number has not yet surpassed the registrations of
240 in 2013–14 and 7194 in 2012–13.90 This is likely due to the slowdown in
registrations that was expected once SMSF auditors had to comply with new
mandatory registration requirements from 2013.91 The committee will continue
to monitor the trend in the number of registrations.
Financial advisers register
4.46
The Financial
Advisers Register was launched in March 2015. At 30 June 2016 over 23 000
financial advisers appear on the register and the register has been searched
over 790 000 times.92 This is an increase from the 22 000 financial advisers
and 200 000 searches reported in the 2014–15 annual report.93
4.47
Following
the implementation of the Financial Advisers Register in March 2015 the
committee raised concerns about the absence of information on the Financial
Advisers Register regarding financial advisers who have been banned.94
This has led
to questions by the committee about:
-
the
ability of ASIC to incorporate information from the banned and disqualified
person's register in the Financial Advisers Register so as to facilitate having
publicly accessible information about financial advisers in a single location;95 and
-
the
restrictions placed on ASIC, by the regulations for the Financial Advisers
Register, in terms of their ability to capture retrospective data in relation
to advisers who had ceased practising prior to 31 March 2015.96
4.48
The
committee recommended that the government consider strengthening the register
by enabling the inclusion of retrospective data on banned and disqualified
financial advisers on the Financial Advisers Register.97 The government noted this
recommendation and informed the committee that consumers are able to verify
whether a person is an authorised adviser by the fact that they appear on the
register.98 The government also informed the committee that consumers are
able to obtain information about banned financial advisers or advisers who have
ceased practising prior to 31 March 2015 by searching the banned and
disqualified register.99
4.49
During
the 25 November 2016 hearing on ASIC oversight the committee raised issue with
the absence of an identification number for financial advisers on the Finical
Advisers Register, potentially allowing for the same person to be recorded on
the register with different information.100 The committee was concerned
that without an identifier outside of name a person could move from business to
business without negative reporting affecting their registrations on the
Financial Advisers Register.101
4.50
ASIC responded to the
committee by noting that the Financial Advisers Register is relatively new and
once the register has been operating for a while, ASIC will be able to identify
issues for improvement, such as identifiers.102
4.51
The committee will
monitor the progress of ASIC in the identification of issues for improvement,
such as identifiers outside of name for financial advisers and the
implementation of any changes.
4.52
The
committee also raised issue with the adequacy of standards contained in
Regulatory Guide 146 (RG146)103 and how RG146 training is provided.
The committee was interested to know the progress of the new requirements for
financial advisers and how many financial advisers have come into the industry
in the past 18 months under the RG146 standards.104
4.53
ASIC
informed the committee that 1542 advisers started to provide advice in 2015 and
2785 advisers started to provide advice in 2016.105 ASIC also informed the
committee that the Corporations Amendment (Professional Standards of Financial
Advisers) Bill 2016 containing the new requirements is currently being
considered by Parliament.106
ASIC noted
that once the new proposed standards body has established the standards for the
new requirements, ASIC will conduct a review of RG146 in relation to the
categories of advisers that it will still be applicable for.107
The committee
will continue to monitor the adequacy of training requirements for financial advisers.
Culture and whistleblowing
4.54
In an
effort to promote good conduct and shift the banking and financial sector
culture in the right direction, the 2015–16 annual report indicates that the
number of consultations with stakeholders in relation to fair and efficient
markets has increased to 903, up from 876 in
2014–15.108
4.55
During 2014–15 ASIC
established the Office of the Whistleblower and adopted a centralised
monitoring procedure for whistleblower complaints. This was in response to recommendations
from the Senate Economics References Committee inquiry into the performance of
ASIC. The 2015–16 annual report notes that during the reporting period the
Office of the Whistleblower dealt with 146 disclosures.109 Eighty per cent of the disclosures were found by ASIC to require no
further action due mainly to insufficient information or ASIC not being the
correct agency to deal with the disclosure.110
Education and
financial literacy
4.56
The National Financial
Literacy Strategy 2014–17 was released in August 2014. The strategy sets out a
national direction for financial literacy and provides a practical framework
for action built around five strategic priorities:
- Educate the next
generation, particularly through the formal education system.
-
Increase the use of
free, impartial information, tools and resources.
-
Provide quality
targeted guidance and support.
-
Strengthen coordination
and effective partnerships.
- Improve research, measurement and evaluation.111
4.57
ASIC
currently leads the work for the strategy and liaises with appropriate
stakeholders, including government, business and educations sectors.112
The first
annual highlights report on the activities delivered under the strategy was
released in 2015.113
4.58
In line
with the aim of providing education and tools to help the community with their
financial decisions, the 2015–16 annual report notes that ASIC's MoneySmart
website provides free, impartial and comprehensive investor and consumer
information on money matters.114 During the reporting period there were 6.1 million visits to
website, an increase of 15 per cent from 2014–15.115 Follow-up research has also shown
that 90 per cent of users 'took action on their finances after visiting the site',
a slight increase from 2014-15.116
4.59
The
2015–16 annual report notes that financial literacy is now a feature of the
Australian Curriculum.117 ASIC's MoneySmart Teaching program
expanded during the reporting period with 5079 schools engaged, compared with
3185 schools in 2014-15.118 A key resource developed for ASIC's
MoneySmart Teaching program during 2015–16 was an online professional
development module for primary school teachers on how to engage students in
mathematics through the use of real money and financial concepts.119
4.60
In June
2016 ASIC released the MoneySmart Cars app, an online tool to assist consumers
in making financial decisions.120 ASIC notes in the 2015–16 annual
report that the app is to complement its regulatory work in relation to car
finance and add-on insurance products.121
Regulatory guidance
4.61
A total
of 31 new or revised regulatory guides were published by ASIC during the
reporting period.122 These included guides on fundraising, corporate
governance, binary options, whistleblowing and the registration of company
auditors.123 The number of new or revised guides published during
the reporting period has increased from 22 during 2014–15.124
4.62
The
committee asked ASIC about their work to update regulatory guides to reflect
changes in the law.125 ASIC responded by noting that it will need to make
small amendments in relation to some regulatory guides while others guides will
remain the same as no changes in law have occurred.126 The committee will continue
to monitor the updating of regulatory guides by ASIC.
4.63
The
financial reporting on-line quiz launched in December 2014 continues to be
hosted by ASIC.127 The on-line quiz aims to help directors test their
knowledge of financial reporting and to direct them to additional
resources that may assist in improving their knowledge.128 During the reporting period this quiz has been completed by 931
directors.129 This is a decrease from more than 2000
directors completing the quiz as reported during 2014–15.130
4.64
In the
previous annual report ASIC indicated that it sought to use the information
collected from the quiz to assist them and other organisations, such as the
Australian Institute of Company Directors and the Institute of Public
Accountants 'in considering ways to assist in educating directors in the
future'.131 No further information on this is provided in the
2015–16 annual report. The committee will continue to monitor the outcomes of
this initiative.
External dispute resolution
4.65
ASIC is
responsible for the financial services and consumer credit dispute resolution
framework. This framework includes both internal dispute resolution and
external dispute resolution schemes. Two external dispute resolution schemes
are approved by ASIC. These are the Financial Ombudsman (FOS) and the Credit
Investments Ombudsman (CIO).132
4.66
During
the reporting period FOS and CIO reported on 96 definite systemic issues and 11
cases of serious misconduct.133 The number of cases of serious
misconduct decreased by three and the number of reported definite systemic
issues increased by 34 when compared to the previous reporting period.134
External dispute
resolution review
4.67
The
2015–16 annual report notes that an independent review into the external
dispute resolution schemes, including complaints management, was announced in
April 2016 by the government.135 The committee notes that the final
report of this review was released on 9 May 2017 and that the review's main
recommendation is that FOS, CIO and the Superannuation Complaints Tribunal be
replaced by a single external dispute resolution body for all financial disputes.136
4.68
FOS is conducting its
own review into the government's request that it extend its small business
jurisdiction to include a review of monetary limits and compensation caps.
Public consultation is currently taking place.137
4.69
The committee will
monitor the government's response and implementation of the recommendations
from the review into the external dispute resolution schemes.
Deregulation
4.70
In line
with the deregulation focus articulated in the government's Statement of
Expectations, ASIC has continued to seek ways to reduce red tape and lower
compliance costs. As stated in the 2015–16 annual report, since September 2013
ongoing annual compliance costs for business has been reduced by 'almost $475
million' with a reduction of $309 million
during the reporting
period.138 ASIC notes the following achievements during the
reporting period in this area:
-
deregulation of
Ministerial powers to ASIC relating to specified market and clearing and
settlement facilities;139
-
guidance on matters
such as registration of company auditors and online tools for consumers;140
-
making it easier for
business to interact with ASIC;141 and
-
ensuring certification
of the ASIC Registry under ISO 9001 Quality Standard in Information Management
is maintained.142
Committee view
4.71
The committee notes
that in relation to the recommendations it made in its examination of ASIC's
2014–15 annual report, the government provided a satisfactory response.
4.72
The committee will
continue to monitor ASIC's activities as described in this chapter particularly
in relation to unlicensed markets, cleanliness measures for sectors outside of
equity markets, relief applications/waivers, adequate training standards for
financial advisers and changes to the financial services and consumer credit
dispute resolution framework.
4.73
The committee considers
that ASIC has fulfilled its annual reporting responsibilities during the
2015–16 financial year. The committee notes that ASIC is continuing to address
significant changes to its mandate and the environment in which it operates
as a result of global trends, emerging issues, and recent reviews and inquiries. The
committee will continue to use annual reports and other mechanisms to monitor
ASIC's performance and ability to adapt appropriately.
4.74
The committee thanks
ASIC for its contributions at hearings, responding to questions on notice, and
the timely provision of information to the committee.
Mr Steve Irons MP
Chair
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1
The Senate, Standing Orders and other orders
of the Senate, August 2015, p. 30.
2
Senate Economics Legislation Committee, Annual
reports (No. 1 of 2017), March 2016, p. 18.
3
Senate Economics Legislation Committee, Annual
reports (No. 1 of 2016), March 2016, p. 18.
4
Senate Economics Legislation Committee, Annual
reports (No. 1 of 2016), March 2016, p. 18.
5
Senate Economics Legislation Committee, Annual
reports (No. 1 of 2016), March 2016, p. 19. The government response to the FSI
was released in October 2015 https://www.treasury.gov.au/~/media/Treasury/Publications%20and%20Media/Publications/20
15/Government%20response%20to%20the%20Financial%20System%20Inquiry/Downloads/P DF/Government_response_to_FSI_2015.ashx (accessed
11 May 2017).
6
Senate Economics Legislation Committee, Annual
reports (No. 1 of 2016), March 2016, p. 19.
7
Senate Economics Legislation Committee, Annual
reports (No. 1 of 2016), March 2016, p. 20.
8
Senate Economics Legislation Committee, Annual
reports (No. 1 of 2016), March 2016, p. 20.
9
ASIC, Answer to question on notice, 25
November 2016 (received 17 January 2017).
10
Public Governance and Resources Legislation
Amendment Act (No. 1) 2015, Revised Explanatory Memorandum, pp. 13–14 of 25 http://parlinfo.aph.gov.au/parlInfo/download/legislation/ems/r5402_ems_126da0a5-fac4-4fa7-
989e-acfc994bec58/upload_pdf/500599.pdf;fileType=application%2Fpdf
, (accessed 11 May 2017).
11
ASIC, Annual Report 2015–16, pp. 30–55.
12
ASIC, Annual Report 2015–16, pp. 56–81.
13
ASIC, Annual Report 2015–16, pp. 82–87.
14
ASIC, Annual Report 2015–16, p. 5.
15
ASIC, Answer to question on notice, 25
November 2016 (received 17 January 2017).
16
ASIC, Annual Report 2015–16, p. 5.
17
ASIC, Annual Report 2015–16, p. 5.
18
ASIC, Annual Report 2015–16, p. 5.
19
ASIC Supervisory Cost Recovery Levy Bill 2017, http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?
bId=r5842 (accessed 11 May 2017).
20
The Treasury, ASIC Supervisory Cost Recovery
Levy Regulations 2017, http://www.treasury.gov.au/ConsultationsandReviews/Consultations/2017/ASIC-Supervisory-
Cost-Recovery-Levy-Regulations-2017 (accessed
11 May 2017).
21
The Treasury, ASIC Supervisory Cost Recovery
Levy Regulations 2017, http://www.treasury.gov.au/ConsultationsandReviews/Consultations/2017/ASIC-Supervisory-
Cost-Recovery-Levy-Regulations-2017 (accessed
11 May 2017).
22
This figure does not reflect the monetary amount
obtained through compensation/remediation or in fines paid. ASIC, Report 485
ASIC enforcement outcomes: January to June 2016, http://download.asic.gov.au/media/3971855/rep485-published-08-august-2016.pdf
(accessed 11 May 2017); ASIC, Report 476 ASIC enforcement
outcomes: July to December 2015, http://download.asic.gov.au/media/4156870/rep476-published-17-february-2017.pdf
(accessed 11 May 2017).
23
ASIC, Annual Report 2014–15, p. 164.
24
ASIC, Annual Report 2015–16, p. 58.
25
ASIC, Annual Report 2015–16, p. 32.
26
ASIC, Annual Report 2015–16, p. 33.
27
ASIC, Annual Report 2015–16, p. 32. ASIC
notes that the civil penalty amount of over $18 million in
2014–15 was due to The Cash Store Pty Ltd matter. The decrease in the total
dollar value of civil penalties under the priority of investor and consumer
trust and confidence could be due to a decrease in the number of civil
litigations being completed under this priority from 43 in 2014-15 to 36 in
2015-16.
28
ASIC, Annual Report 2015–16, p. 33. ASIC
notes that for the 2015–16 reporting period the number of infringement notice
reported was separated by notices under the ASIC Act and notices under the National
Consumer Credit Protection Act 2009. The 2015–16 annual report does not
elaborate on the decrease in the number of infringement notices under the
priority of investor and consumer trust and
confidence.
29
ASIC, Annual Report 2015–16, p.
59. ASIC provides no data for the 2015–16 period regarding compensation or
remediation provided under the priority of fair and efficient markets. The
2015–16 annual report does not elaborate on this point.
30
ASIC, Annual Report 2015–16, pp. 32, 58.
31
ASIC, Annual Report 2015–16, pp. 32, 58.
32
ASIC, Report 485 ASIC enforcement outcomes:
January to June 2016, http://download.asic.gov.au/media/3971855/rep485-published-08-august-2016.pdf
(accessed 11 May 2017); ASIC, Report 476 ASIC enforcement
outcomes: July to December 2015, http://download.asic.gov.au/media/4156870/rep476-published-17-february-2017.pdf
(accessed 11 May 2017).
33
ASIC, Media Centre – Find a media release,
http://asic.gov.au/about-asic/media-centre/find-a- media-release/?page=4&filter=2016&find=all
(accessed 15 May 2017).
34
Mr Peter Kell, Deputy Chairman, Australian
Securities and Investments Commission, Committee Hansard, 25 November 2016, pp.
9, 10–11.
35
Mr Peter Kell, Deputy Chairman, Australian
Securities and Investments Commission, Committee Hansard, 25 November 2016, pp.
9, 10–11.
36
Australian Securities and Investments
Commission v Mariner Corporation Limited [2015] FCA 589.
37
Parliamentary Joint Committee on Corporations
and Financial Services, Report on the 2014-15 annual reports of bodies
established under the ASIC Act, May 2016, p. 25.
38
Australian Government, Australian Government
response to Parliamentary Joint Committee on Corporations and Financial
Services' report: The 2014-15 annual reports of bodies established under the
ASIC Act, January 2017.
39
The Treasury, ASIC Enforcement Review, http://www.treasury.gov.au/ConsultationsandReviews/Reviews/2016/ASIC-Enforcement-
Review (accessed 11 May 2017).
40
The Treasury, ASIC Enforcement Review, http://www.treasury.gov.au/ConsultationsandReviews/Reviews/2016/ASIC-Enforcement-
Review (accessed 11 May 2017).
41
ASIC, Annual Report 2015–16, p. 3.
42
ASIC, Annual Report 2014–15, pp. 6, 8.
43
ASIC, Annual Report 2015–16, pp. 32, 57.
44
ASIC, Annual Report 2015–16, p. 41.
45
ASIC, Annual Report 2015–16, p. 41.
46
ASIC, Annual Report 2015–16, p. 65.
47
ASIC, Annual Report 2015–16, p. 65.
48
ASIC, Annual Report 2015–16, p. 65.
49 Committee Hansard,
25 November 2016, p. 23; ASIC, Annual Report 2015–16, p. 22.
50
Mr Warren Day, Senior Executive Leader,
Australian Securities and Investments Commission, Committee Hansard, 25 November 2016, p.
23.
51
ASIC, Annual Report 2012–13, p. 14; ASIC, Annual Report 2015–16, p. 23.
52
ASIC, Annual Report 2015–16, p. 23; ASIC, Answer to question on notice, 25 November 2016 (received 17 January
2017). The 2015-16 annual report notes that out of 52 authorised markets, 34
are unlicensed.
53
ASIC, Annual Report 2015–16, p. 23.
54
ASIC, Answer to question on notice, 25
November 2016 (received 17 January 2017).
55
ASIC, Answer to question on notice, 25
November 2016 (received 17 January 2017).
56
ASIC, Answers to question on notice, 25
November 2016 (received 17 January 2017).
57
ASIC, Answers to question on notice, 25
November 2016 (received 17 January 2017).
58
ASIC, Answers to question on notice, 25
November 2016 (received 17 January 2017).
59
ASIC, Answers to question on notice, 25
November 2016 (received 17 January 2017).
60
ASIC, Annual Report 2015–16, pp. 3, 76.
61
ASIC, Annual Report 2015–16, pp. 3, 76.
62
ASIC, Annual Report 2015–16, pp. 3, 76.
63
ASIC, Annual Report 2015–16, pp. 3, 76;
ASIC, Report 487 Review of Australian equity market cleanliness, http://download.asic.gov.au/media/3972840/rep487-published-9-august-
2016.pdf (accessed 12 May 2017).
64
ASIC, Answers to question on notice, 25
November 2016 (received 17 January 2017).
65
ASIC, Answers to question on notice, 25
November 2016 (received 17 January 2017).
66
ASIC, Answer to question on notice, 25
November 2016 (received 17 January 2017).
67
ASIC, Answer to question on notice, 25
November 2016 (received 17 January 2017).
68
ASIC, Answer to question on notice, 25
November 2016 (received 17 January 2017).
69
ASIC, Answer to question on notice, 25
November 2016 (received 17 January 2017).
70
ASIC, Annual Report 2015–16, p. 7; ASIC, Answer
to question on notice, 25 November 2016 (received 17 January 2017).
71
ASIC, Annual Report 2014–15, p. 13.
72
ASIC, Answer to question on notice, 25
November 2016 (received 17 January 2017).
73
ASIC, Answer to question on notice, 25
November 2016 (received 17 January 2017); ASIC, ASIC Gazette, http://asic.gov.au/about-asic/corporate-publications/asic-gazette/
(accessed 11 May 2017).
74
ASIC, Annual Report 2015–16, pp. 14, 48.
75
ASIC, Annual Report 2015–16, pp. 14, 48.
76
ASIC, Annual Report 2015–16, pp. 14, 48.
77
ASIC, Annual Report 2014-15, pp. 20–21.
78
ASIC, Annual Report 2015–16, p. 14.
79
ASIC, Annual Report 2015–16, pp. 14, 48.
80 ASIC, Annual
Report 2015–16, pp. 14, 48, 77.
81 ASIC, Annual
Report 2015–16, pp. 14, 48, 77.
82
ASIC, Annual Report 2015–16, p. 47.
83
ASIC, Annual Report 2015–16, p. 47.
84
ASIC, Annual Report 2015–16, pp. 6, 83.
85
Department of Finance, Australian Securities
and Investments Commission (ASIC) Registry, https://www.finance.gov.au/procurement/scoping-studies/asic-faqs/
(accessed 11 May 2017).
86 ASIC, Annual
Report 2015–16, pp. 21, 83, 84.
87
ASIC, Annual Report 2015–16, p. 83; ASIC, Annual Report 2014–15, pp. 65–66; ASIC, Annual Report 2013–14, pp. 47, 50–51.
88
ASIC, Annual Report 2015–16, p. 87.
89
ASIC, Annual Report 2014–15, p. 68.
90
ASIC, Annual Report 2013–14, p. 55.
91
Mr Greg Tanzer, Commissioner, Australian
Securities and Investments Commission, Committee Hansard, 20 March 2015, p. 20.
92
ASIC, Annual Report 2015–16, pp. 21, 24.
93
ASIC, Annual Report 2014–15, p. 68.
94 Committee Hansard,
16 October 2015, pp. 2–5.
95 Committee Hansard,
16 October 2015, pp. 2–5; 19 November 2015, pp. 4–5.
96 Committee Hansard,
16 October 2015, pp. 2–5; 19 November 2015, pp. 4–5.
97
Parliamentary Joint Committee on Corporations
and Financial Services, Report on the 2014–15 annual reports of bodies
established under the ASIC Act, May 2016, p. 30.
98
Australian Government, Australian Government
response to Parliamentary Joint Committee on Corporations and Financial
Services' report: The 2014–15 annual reports of bodies established under the
ASIC Act, January 2017.
99
Australian Government, Australian Government
response to Parliamentary Joint Committee on Corporations and Financial
Services' report: The 2014–15 annual reports of bodies established under the
ASIC Act, January 2017.
100 Committee Hansard,
25 November 2016, p. 7.
101 Committee Hansard, 25 November 2016, p. 7.
102
Mr Peter Kell, Deputy Chairman, Australian
Securities and Investments Commission, Committee Hansard, 25 November 2016, p.
7.
103 ASIC, Licensing: Training of financial product advisers, Regulatory
Guide 146, July 2012, http://download.asic.gov.au/media/1240766/rg146-published-26-september-2012.pdf
(accessed 17 May 2017).
104 Committee Hansard, 25 November 2016, pp.
8–9; Australian Government, Improving Australia's Financial System:
Government Response to the Financial System Inquiry, October 2015, p. 21.
The new requirements were an outcome of the FSI and include the requirements
for financial adviser to: hold a degree qualification; undertake a professional
year; undertake ongoing professional development; pass a registration exam; and
subscribe to a code of ethics.
105
ASIC, Answer to question on notice, 25
November 2016 (received 17 January 2017).
106 ASIC, Answer to question on notice, 25 November 2016
(received 17 January 2017).
107
ASIC, Answer to question on notice, 25
November 2016 (received 17 January 2017).
108 ASIC, Annual Report 2015–16, p. 57.
109 ASIC, Annual Report 2015–16, pp. 3, 96.
110 ASIC, Annual Report 2015–16, p. 96.
111 ASIC, National Financial Literacy Strategy, http://www.financialliteracy.gov.au/strategy-and- action-plan/financial-literacy-action-plan
(accessed 12 May 2017).
112 ASIC, Annual Report 2015–16, p. 49.
113 ASIC, Annual Report 2015–16, p. 49; ASIC, National
Financial Literacy Strategy, http://www.financialliteracy.gov.au/strategy-and-action-plan/financial-literacy-action-plan
(accessed 12 May 2017).
114 ASIC, Annual Report 2015–16, pp. 2, 31, 50.
115
ASIC, Annual Report 2015–16, pp. 2, 31, 50.
116 ASIC, Annual Report 2015–16, pp. 31, 50; ASIC, Annual
Report 2014–15, pp. 41, 161.
117 ASIC, Annual Report 2015–16, pp. 2, 52.
118 ASIC, Annual Report 2015–16, pp. 2, 25, 31.
119
ASIC, Annual Report 2015–16, p. 52.
120 ASIC, Annual Report 2015–16, pp. 3, 24, 50.
121 ASIC, Annual Report 2015–16, p. 50.
122
ASIC, Annual Report 2015–16, pp. 31, 57.
123 ASIC, Annual
Report 2015–16, pp. 60, 67, 77, 96.
124 ASIC, Annual
Report 2014–15, pp. 6, 8, 40–41, 57–58; Annual Report 2015–16, pp.
31, 57.
125 Committee Hansard, 25 November 2016, p. 10.
126 Ms Louise Macaulay, Senior Executive Leader, Australian Securities
and Investments Commission, Committee Hansard, 25 November 2016, p. 10.
127 ASIC, Annual Report 2015–16, p. 67; ASIC, Financial
reporting quiz for directors, http://asic.gov.au/regulatory-resources/financial-reporting-and-audit/directors-and-financial-
reporting/financial-reporting-quiz-for-directors/
(accessed 11 May 2017).
128 Financial Reporting Council, FRC survey on Financial Literacy of Australian
Directors, September 2012, http://asic.gov.au/regulatory-resources/financial-reporting-and-audit/directors-
and-financial-reporting/financial-reporting-quiz-for-directors/ (accessed
11 May 2017).
129 ASIC, Annual Report 2015–16, p. 67.
130 ASIC, Annual Report 2014–15, p. 58.
131 ASIC, Answer to question on notice, 9 March 2016 (received 19
April 2016).
132 ASIC, Annual Report 2015–16, p. 43.
133 ASIC, Annual Report 2015–16, p. 43.
134 ASIC, Annual Report 2015–16, p. 43; ASIC, Annual Report
2014–15, p. 48.
135
ASIC, Annual Report 2015–16, p. 43.
136 The Australian Government the Treasury, Final report Review of
the financial system external dispute resolution and complaints framework, http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/Reviews%20
and%20Inquiries/2016/Review%20into%20EDR/Key%20Documents/PDF/EDR%20Review% 20Final%20report.ashx 3 April 2017 (accessed 12
May 2017).
137 ASIC, Annual Report 2015–16, p. 43.
138 ASIC, Annual Report 2015–16, p. 6.
139 ASIC, Annual Report 2015–16, p. 69.
140 ASIC, Annual Report 2015–16, pp. 3, 67.
141 ASIC, Annual Report 2015–16, pp. 6, 82.
142 ASIC, Annual Report 2015–16, p. 84.