Jurisdiction - Australia
Reports and Analysis
Australia – Final Report: ASIC Funding, Resources, And Powers.

10 December, 2014


Legal News & Analysis – Asia Pacific – Australia – Regulatory & Compliance


The FSI has thrown its support behind an industry funding model for ASIC, a recommendation initially made in the 1997 Wallis Inquiry regarding both ASIC and APRA, but only adopted in relation to APRA.


The FSI’s Final Report recommends that Government continue to set ASIC’s overall funding needs, citing Herbert Smith Freehills’ submission to the Inquiry on ASIC funding. This would be done through three-yearly funding reviews, which would bring additional rigour to the budget process, and improve the efficiency of the regulator.


The Final Report identifies the main benefit of industry funding as the potential to give ASIC more predictable funding, as well as to strengthen engagement between ASIC and the industry on the costs of conduct and market regulation.


The FSI recognises that effective regulation depends on effective human capital, and that more effective regulators are likely to require higher salaries. To facilitate this, the Final Report proposes that ASIC staff are removed from the Public Service Act, and that ASIC and APRA are able to opt out of public sector-wide employment, staffing, and other whole-of-Government policies and procedures that unnecessarily constrain their flexibility to deliver their regulatory mandate.


No doubt this will be music to ASIC’s ears.


The FSI has also heeded ASIC’s call for increased civil and criminal penalties, and for power to seek disgorgement of profits earned as a result of conduct in breach of the Corporations Act. This call was set out in ASIC’s Report 387 – Penalties for corporate wrongdoing.


However, the FSI’s Final Report has not dealt ASIC all the aces. It has also recommended establishing a new Financial Regulator Assessment Board (to replace the existing Financial Sector Advisory Council) which would provide the Government with an annual review of the performance of the financial regulators – ASIC, APRA and the payment system regulation function of the RBA.


The FSI notes that Parliamentary scrutiny tends to be episodic and focus on particular issues or decisions.


This annual assessment would be against the regulators’ statutory mandates, and priorities identified in the annual Statements of Intent each publishes to the Government (in response to the Government’s annual Statement of Expectations). The Inquiry has encouraged both the Government and the regulators to make greater use of the SOEs and SOIs, respectively, as instruments of strategic direction, risk tolerance and performance indication. They may also be used to further another recommendation of the Inquiry – that there be a greater focus on competition in the financial system. Regulators could address the effect on competition of their regulatory conduct. The Final Report has also recommended including a specific requirement to take competition issues into account in ASIC’s statutory mandate.


The annual report would be made public once the Government has had an opportunity to consider a response.


The Assessment Board would be comprised of 5-7 part time members with industry and regulatory experience, with diversity of membership to guard against any particular group or industry view having undue influence.




2. Bank Funding, Prudential Regulation, And Disclosure

3. Consumer Outcomes For Product Issuers

4. General Advice Superannuation And Life Insurance

5. Innovation And Technological Change


herbert smith Freehills


For further information, please contact:


Paul HughesPartner, Herbert Smith Freehills

[email protected]


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