20 May, 2015
The 20th ASIC Annual Forum (the "Forum") took place on 23-24 March 2015. The overall theme of the conference was "creating confidence to grow". Some of the key messages coming out of the Forum are set out below. These provide an indication of ASIC's areas of focus over the coming year.
- ASIC's approach to enforcement penalties – One of the key messages is that ASIC is keen to move away from being viewed as a "light touch" regulator by adopting a more proactive and interventionist regulatory approach; there appeared to be a general sentiment that the current penalties for white collar crime in Australia are inadequate. It is likely that ASIC will actively seek to increase these penalties going forward to ensure that the punishment for breaking the law is greater than any potential monetary gain.
- Principles-based regulation – Throughout the Forum a preference was expressed by both ASIC and the industry for principles-based rather than rules-based regulation, in particular to avoid the risk of "technical arbitrage" by industry participants and as a way to ensure regulation keeps up with rapid digital change. ASIC has also expressed endorsement of the behavioural economics approach to regulation which takes into account behavioural biases and how people actually make decisions, and this reflects a distinct shift away from the current position which is principally a disclosure based regulatory regime. It is clear that ASIC expects firms to consider both the integrity of the markets and their clients' best interests in every decision that they make.
- Digital disruption – While ASIC acknowledged that digital disruption offers new forms of access, greater competition and greater efficiency, it also brings with it new risks, such as the risk of cyber-attacks. A key risk that ASIC has identified is that firms are not currently placing enough emphasis on cyber resilience and new technology coupled with a lack of client trust in traditional banks has opened the door for technology "disruption" companies to enter the market. ASIC expects firms to respond by being cyber resilient through granular risk management systems and stressed that boards should be aware of cyber risk as part of their risk oversight role. The rapidly increasing use of digital and electronic product deliveries will likely force ASIC to increase its regulatory focus in this area.
- Innovation hub – At the Forum, ASIC attempted to challenge the assumption that regulation necessarily inhibits innovation. ASIC made a surprise announcement at the Forum that it will launch an "innovation hub" in the upcoming financial year. The hub will be a "one stop shop" to assist start-ups in navigating the ASIC regulatory regime to facilitate innovation in the financial sector. As part of this initiative, ASIC is considering streamlining common application processes such as applying for or varying the conditions of an Australian financial services licence, appointing a dedicated ASIC contact to deal with the start-up, providing more opportunities for the start-up to talk directly with ASIC officers who make decisions about the start-up's business activities and introducing a "live web chat" facility to allow start-ups to liaise with ASIC's registry function in real time.
For further information, please contact:
Jonathan Gordon, Partner, Ashurst
jonathan.gordon@ashurst.com
Corey McHattan, Partner, Ashurst
corey.mchattan@ashurst.com
Lisa Simmons, Partner, Ashurst
lisa.simmons@ashurst.com
