Chapter 3

Chapter 3

Overview of ASIC

3.1        This chapter aims to acquaint readers with the Australian Securities and Investments Commission (ASIC). ASIC is the corporate, markets, financial services and consumer credit regulator. It has existed as an independent Australian government statutory authority[1] since 1991, when the Australian Securities Commission, as it was then known, commenced operation.[2]

3.2        ASIC has general administration of the Corporations Act 2001, the principal legislation governing the affairs of companies in Australia. ASIC oversees company registration and notifications, and is tasked with seeking to ensure that companies, schemes, directors, company officers, auditors, insolvency practitioners and other market participants fulfil their legal obligations. ASIC licenses providers of financial services. It also licenses and regulates individuals and businesses that engage in consumer credit activities. In addition, ASIC's market regulation role makes it responsible for supervising financial market operators and participants, including real‑time trading on Australia's domestic licensed markets.

3.3        These responsibilities mean that ASIC's work involves over two million companies, 5,000 Australian financial services (AFS) licensees, 5,800 credit providers, 4,800 registered company auditors, 680 registered liquidators, 4,150 registered managed investment schemes and 18 authorised financial markets.[3]  Illustrating its broad remit, ASIC provided an overview of its activities and outcomes achieved. In the last three years to October 2013, ASIC:

ASIC's statutory objectives and functions

3.4        ASIC has functions under the Australian Securities and Investments Commission Act 2001 (ASIC Act), the Corporations Act and other legislation.[5] The ASIC Act requires that, in performing its functions and exercising its powers, ASIC must strive to:

3.5        In its main submission to the committee, ASIC provided the following overview of how it sees its role:

[ASIC] has a growing regulatory remit and operates in a global environment that is both complex and dynamic.

The forces of market-based financing, financial innovation-driven complexity and globalisation that are converging on our financial system create opportunities to fund economic growth; however, they also create risks.

Our challenge as a regulator is to respond quickly to the matters that require our attention, inform and educate investors and financial consumers so they can make confident and informed decisions, and ensure we have the capacity to effectively regulate financial markets, financial products and financial services providers, within the resources we have.[7]

3.6        When it was established in 1991, the main stated purpose of the Australian Securities Commission, as ASIC was then known, was 'to regulate companies and the securities and futures industries in Australia'.[8] ASIC's responsibilities have increased since then following various reforms pursued by successive governments, including as a result of intergovernmental agreements that resulted in the Commonwealth taking over certain responsibilities from the states and territories. In particular, ASIC gained significant new responsibilities between 2009 and 2012. However, as indicated by the following observation made in 2004 by ASIC's then acting chairman, ASIC has been required to operate in an environment of reform and change for a sustained period:

The background to all of these activities of ours is one of constant and continuous change. You have seen that the evolution of financial and corporate regulation in Australia over the last decade has been rapid and dramatic. Reform—legislative, common law, self-regulatory, industry-driven—seems to have been constant and will certainly not stop or really even pause in 2004. But that reform has been necessary, simply to try and keep pace (if indeed it has done that), with the growth and evolution of the markets in Australia that rely on effective regulation.[9]

3.7        A timeline of key legislative reforms and other developments that are relevant to ASIC's responsibilities is at Appendix 4.

Powers available to ASIC

3.8        ASIC has the ability to register companies, businesses and managed investment schemes; grant AFS licences and Australian credit licences; register auditors, self-managed superannuation fund (SMSF) auditors and liquidators; grant relief from various legislative requirements; make rules aimed at ensuring the integrity of financial markets; order the winding up of a company in certain circumstances; and impose a stop order if a product disclosure statement is defective. To assist it to carry out its functions, ASIC has been granted a variety of investigative and enforcement tools under the ASIC Act and the Corporations Act. These include the power to:

Governance and organisational structure

3.9        ASIC is established under the ASIC Act. It comprises a chairperson, a deputy chairperson and between one and six other members (the commission).[13] ASIC's governance structure is considered in more detail in Chapter 26.

3.10      ASIC's overall organisational structure separates its operations into three broad 'clusters': markets; investors and financial consumers; and registry and licensing. Within these broad operations areas are multiple stakeholder and enforcement teams. ASIC's organisational structure is depicted at Figure 3.1.

Figure 3.1: ASIC's corporate structure (as at October 2013)

Figure 3.1: ASIC's corporate structure (as at October 2013)

Source: ASIC, Submission 45.2, p. 15.

ASIC's resources

3.11      In 2012–13, ASIC received $350 million in appropriation revenue and $17 million from other sources. Its operating expenses were approximately $411 million. ASIC employed 1,844 staff on a full-time equivalent (FTE) basis.[14]

3.12      At times, ASIC has been granted additional funding through the Budget process either as a result of new responsibilities it has been given or to supplement its operations. Some recent examples are listed below:

3.13      However, ASIC has also been subject to the efficiency dividend applied to government departments and agencies.[21] ASIC's funding over the forward estimates was also reduced as part of the most recent Budget. The amount of funding provided to ASIC and the funding model utilised to determine its funding clearly will have a significant impact on the agency's performance. These issues are examined in more detail in Chapter 25.

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