Joe is known to many at the agency from his time as National Director of Enforcement from 1996-2000 and subsequent interactions as a lawyer at Herbert Smith Freehills. His wealth of domestic and international experience will serve ASIC well in the vital work it does in supporting the financial system and economy, especially as Australia recovers from the downturn caused by the COVID-19 pandemic.

‘We are also pleased to welcome Sarah Court, who joins as Deputy Chair from the Australian Competition and Consumer Commission (ACCC). Again, we know Sarah very well and appreciate the skill and experience she brings from our regulatory counterpart,’ he said.

‘We will work with Joe and Sarah over the coming weeks to manage a smooth transition to his leadership of the organisation.’

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• protecting consumers from harm at a time of heightened vulnerability
• maintaining financial system resilience and stability
• supporting Australian businesses to respond to the effects of COVID-19
• continuing to identify, disrupt and take enforcement action against the most harmful conduct, and
• continuing to build our organisational capacity in challenging times.

The Interim Corporate Plan is a result of ASIC’s modified strategic planning process for the 2020-21 year, in response to the impact of COVID-19 on the financial system. Our immediate focus has been on assessing the key vulnerabilities in our regulated sectors in the current environment and developing targeted strategic priorities.

‘The priorities identified in this Corporate Plan enable us to focus on activities that directly address the needs of consumers and firms as they respond to COVID-19,’ said ASIC Chair James Shipton.

‘Examples of new activities that flow from this plan include:

• cross-ASIC working groups on scams, unlicensed advice and misleading advertising
• expanding our markets supervision work to support fair and orderly operation of markets and to ensure investors are appropriately informed
• providing relief in relation to capital raising, shareholder meetings and reporting, and financial advice
• ensuring that there are measures in place to assist consumers who experience hardship, especially in relation to credit and insurance, and
• facilitating access to effective advice when individuals are considering seeking early access to their superannuation.’

At the same time, ASIC has published an update on the timing of key outputs over the coming months, reflecting changes from our adjusted work program announced on 14 April 2020.

This now includes information on proposed timing of consultation and release of regulatory guidance in relation to legislation implementing the recommendations of the Financial Services Royal Commission.

‘The revised timetable of ongoing work is an important step in assisting the transition of the business community and broader economy to a post-pandemic world,’ Mr Shipton said.

‘However, it is important to note that the fact that some work has been delayed longer than would otherwise be desirable is not an abrogation of our regulatory work, but a recognition that some existing activities and new tasks must take precedence over work we would otherwise be doing. Indeed, a number of important enforcement outcomes have been achieved in the past two months, as the courts have continued to hear matters and deliver judgments.’

For those Royal Commission measures deferred for introduction by 30 June 2021, ASIC will continue to engage with stakeholders in relation to the timing of consultations of associated guidance.

Matters referred to in our 14 April 2020 statement that remain on hold are detailed on ASIC’s website.

Download

• Interim Corporate Plan
• Revised timetable of ongoing work
• Adjusted work program announced on 14 April 2020

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ASIC can now provide details on many of the activities that will be affected (see Details of ASIC’s regulatory work and priorities in response to COVID-19). We will provide further advice on changes to ASIC work implementing the recommendations of the Financial Services Royal Commission in light of changes to the Parliamentary timetable and any future Government decisions on those measures.

ASIC is committed to working constructively and pragmatically with the firms we regulate, mindful that they may encounter difficulties in undertaking their regulatory work due to the impact of COVID-19.

ASIC has delayed a number of activities not immediately necessary in light of these significantly changed circumstances, including consultations, regulatory reports and reviews.

Onsite supervisory work, such as the enhanced approach of ASIC’s Close and Continuous Monitoring Program, is now not possible. However, ASIC will continue to monitor firms remotely, including through close working and information sharing arrangements with APRA. We will also continue to draw on established working arrangements with senior executives to both supervise and support firms.

In response to COVID-19 ASIC:

• has stepped up its markets supervision work to support the fair and orderly operation of markets, ensure investors are appropriately informed, and protect against manipulation and abuse;
• will heighten its support for consumers who may be vulnerable to scams and sharp practices, receive poor advice, or need assistance in finding information and support should they fall into hardship; and
• will identify other actions needed to support firms such as facilitating the timely completion of capital raisings and other urgent transactions, providing regulatory relief, where appropriate, and identifying measures to support small business.

Enforcement action will continue. However, it is recognised that there may be some changes to the timing and process of investigations to take into account the impact of COVID-19. There will also be changes due to, among other things, constraints created by variations to usual court procedures.

Key functions will remain available to those who rely on them, including registry operations and services, receipt of whistleblower, breach and misconduct reports, and general contact points for industry.

ASIC Chair James Shipton said, “ASIC recognises that participants in the Australian financial services sector are under enormous strain due to the effects of COVID-19. We also acknowledge that they are taking special measures to support their customers who are adversely affected. We expect them to continue to act fairly and in the best interest of consumers in these extraordinary times.

“To assist firms, ASIC will limit the regulatory activity that they will need to respond to as much as possible. We are also working with the financial industry to identify other areas where we can provide support.

“However, it is important to note that this is not an abrogation of our regulatory work, but a recognition that some existing activities and new tasks must take precedence over work we would otherwise be doing.

“In fact, COVID-19 has increased the workload of our organisation as there is a heightened risk of significant consumer harm, the possibility of serious breaches of the financial services laws, and challenges in ensuring market integrity and the continued funding of companies and the economy.

“ASIC is being especially vigilant in addressing predatory practices, scams and fraud,” Mr Shipton said.

Despite the challenges posed by COVID-19, ASIC expects entities to treat customers fairly, avoid adding further financial harm or burden to consumers, and act to maintain the integrity and efficiency of markets.

In addition, financial services and credit licensees and participants in financial services markets continue to have legal obligations including, where applicable, to:

• act fairly, honestly and efficiently;
• report material breaches of the law;
• maintain records of the financial services they provide; and
• ensure appropriate supervision of the provision of financial services and credit activities, even where staff are working remotely.

ASIC is committed to working with the regulated population, and representatives of industry and consumers to maintain the proper functioning of markets and financial systems in the best interests of consumers and the Australian economy.

ASIC will provide feedback on specific issues to affected stakeholders and will provide further general updates and sector specific information, including FAQs, on ASIC’s COVID-19 information page.

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Industry leaders took to the stage during the day to cover the big issues impacting investment management today – from ESG to understanding the financial marketplace of the future, identifying and responding to ethical conundrums and improving transparency and communication with investors.

There was widespread acknowledgement from speakers that disclosure and regulation can only go so far to address challenges highlighted by the Hayne Royal Commission, and agreed that culture change is equally important. This thorny question formed the basis of a robust debate entitled “The future of financial services lies in better culture, not regulation.”

Almost 200 delegates responded and the results marginally favoured culture over regulation in a close-fought battle. 48.5% of attendees said culture change was the future, 39.7% argued for regulation and 11.9% were undecided.

Earlier in the day ASIC Chair James Shipton honed in on fairness in investment management, when he said that the only way to increase trust and ensure good investor outcomes is through a mixture of culture change and effective regulation.

“It’s right that the community has high expectations of the financial services industry and regulators – because the system exists to serve people – collectively, but also individually.

“Professionalism is a combination of competence and conscientiousness, and although we have a lot to be proud of in Australia, we can’t rest on our laurels – we must continually strive to improve standards and fairness,” he said.

Sonia Gandhi, CFA, Director of Ethics Education & Professional Standards for the CFA Institute highlighted how easy it is for clear ethical breaches to remain unrecognised – for reasons including situational influence, or the misguided belief that if everyone else is behaving in a certain way it must be ok.

It was Ms. Gandhi’s very strong view that we have enough regulation, and that what is needed is a robust ethical culture and good corporate practice across all levels of management. Although she agreed with Mr Shipton that the concept of fairness must lie at the heart of all decisions.

“In every interaction we need to ask ourselves three questions – ‘is it legal?’, although this is the easy part – we usually know whether something is legal or not. ‘Is it honest’ is the more important question, followed by ‘is it ethical, or how would I feel if I were on the other side of this action, in my client’s shoes. Would I really think what I am doing is fair, if it were being done to me?’”, Ms Gandhi said.

Talking about the conference itself, CEO of CFA Societies Australia, Lisa Carroll, said that an important part of CFA Societies Australia’s role is to promote the highest ethical and professional standards in the investment industry, and that the 2019 Beyond Disruption Conference is part of that commitment, in conjunction with research, industry commentary and professional development.

Ms. Carroll pointed to the results of the 2018 CFA Institute Future of Finance’s global survey on the state of investors trust. Entitled “The Next Generation of Trust”, she said the report shows the importance of talking about and improving trust, ethics and professionalism in Australia now.

“Trust in the financial services industry in Australia is among the lowest in the world – only 31% of those surveyed trust the industry, and worldwide, only German investors have less trust (24%) in the financial services industry than we do.

“This may not be particularly surprising, given the Hayne Royal Commission findings, but as an industry we must work together to address it, so I am pleased that so many of the delegates said how engaging and thought-provoking they found the speakers’ presentations.

“The CFA Societies Australia conference offers a forum for industry luminaries and experts to openly and honestly discuss the major issues we face as an industry – and more importantly, to come together to identify potential solutions,” she said.

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The EU Benchmarks Regulation (BMR) prescribes a European common framework to ensure the integrity and accuracy of benchmarks used in the EU.

On 29 July 2019, under Article 30 of Regulation (EU) 2016/1011, the European Commission recognised Australia’s legal and supervisory framework applicable to the administrators of certain financial benchmarks as equivalent to the corresponding requirements under the BMR, and recognised that those requirements are subject to effective supervision and enforcement.

This decision will allow benchmarks declared significant by ASIC (BBSW, S&P/ASX200, Bond Futures Settlement Price, CPI, and Cash Rate) to be used in the EU by EU-supervised entities.

The MoU sets out appropriate cooperation arrangements to complement the EU’s equivalence decision, as well as to ensure effective information exchange and supervisory coordination. Under it, both authorities agree to provide each other with the fullest cooperation permissible under their laws and regulations in relation to all relevant information and supervisory activities regarding the covered benchmarks.

Both authorities agree to confidentiality requirements for any information shared, requests made, and contents of the requests made, under the MoU.

The MoU was signed on 9 October 2019 by James Shipton, the Chair of ASIC, and by Steven Maijoor, the Chair of ESMA.

Commenting on the MoU, James Shipton said: ‘Enhancing and improving regulatory cooperation with our international counterparts is a priority for ASIC. We are very pleased to announce this agreement and look forward to our cooperation with ESMA in the future.

Benchmarks play a vital role in cross-border financial transactions and international regulators need to work together to ensure their integrity and accuracy.

‘When we provide mutual assistance to each other and exchange views and information, this helps ASIC to achieve its vision for a fair, strong and efficient financial system for all Australians.’

Steven Maijoor, ESMA Chair, said: ‘The use of financial benchmarks in global capital markets is important for market participants and their accuracy and reliability needs to be ensured at all times. In order to help regulators achieving these objectives, I am pleased that the ESMA-ASIC Memorandum of Understanding will support European regulators and ASIC to work together on a sound legal basis.’

ASIC is Australia’s integrated corporate, markets, financial services and consumer credit regulator. ASIC is an independent Commonwealth Government body. Its vision is for a fair, strong and efficient financial system for all Australians.

ESMA is the European Union’s regulator for securities markets. Its mission is to enhance investor protection and promote stable and orderly financial markets.

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These are the words of James Shipton, Chairman of the Australian Securities and Investment Commission (ASIC) who today addressed the CFA Societies Australia Beyond Disruption Conference.

Mr Shipton reminded delegates that financial systems ultimately serve people, both collectively and individually, and that this is why fairness must lie at the heart of what we do – because the human impact of getting things wrong can be so catastrophic.

Mr Shipton pointed to the extensive government support ASIC has been given, including extra funding of $400 million over four years to give the regulator the fire power to really make a difference, post Hayne Royal Commission.

“We want to make significant improvements, but at the same time, I don’t want to create a police state or a nanny state, I want to create an environment where professionalism is rewarded, where there is confidence that consumers are getting a fair outcome,” he said.

Mr Shipton said he is acutely aware of the high community expectations of both the financial services industry and regulators, and that we all need to lean into the challenge of addressing consumer harm.

He highlighted a number of strategic priorities which included high deterrence enforcement, implementing Commissioner Hayne’s recommendations, protecting vulnerable consumers and addressing harms in insurance among other equally crucial factors.

“We are taking a multi-dimensional and multi-disciplinary approach, and we do this in three ways – through close and continuous monitoring, corporate governance reviews, and product intervention powers,” he said.

Mr Shipton went on to acknowledge that his tools are limited, and that it is not possible to rely solely on disclosure to protect consumers.

“Disclosure doesn’t solve complexity, the effects of disclosure vary by person and situation and warnings don’t always work as they are intended,” he said.

Mr Shipton finished by praising the CFA Institute for the work it has done to raise standards and promote professionalism in financial services, something he defined as being a combination of competence and conscientiousness.

“We have a lot to be proud of here in Australia – our industry could be the envy of our region and the world, but we can’t rest on our laurels, we must continually strive to improve both standards and fairness,” he said.

By ASIC Chair James Shipton, addressing the CFA Societies Australia Beyond Disruption Conference

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The Update outlines a number of measures across the organisation by which ASIC is implementing the seven priorities highlighted in its Corporate Plan 2019-23, one of which is to prioritise the recommendations and referrals from the Royal Commission.

ASIC Chair James Shipton said it was important for ASIC to regularly account for its progress in implementing the recommendations.

‘ASIC is working on the Royal Commission recommendations directed at ASIC and addressing concerns in the areas highlighted by the Royal Commission.

‘As we have seen in recent weeks, a number of those referrals and case studies are before the courts, and we have more under investigation. As we have also seen, the new regulatory powers provided to ASIC are enabling early intervention on what we believe are matters of potential significant harm to consumers.

‘In some cases we have initiated steps to provide consumers with interim protection ahead of legislative reforms, such as our proposed ban on unsolicited direct sales of life insurance and consumer credit insurance. Our new supervisory initiatives – Close and Continuous Monitoring and the Corporate Governance Taskforce – also continue to gain momentum.  Finally, we are dedicating significant additional resources to support the Government’s Implementation Roadmap.

‘This Update, outlining as it does the progress in pursuit of ASIC’s renewed enforcement mandate, should indicate the sense of urgency and significance that the ASIC Commissioners and staff are bringing to the task. It also demonstrates that we will continue to use all of the regulatory tools at our disposal to deliver a fair, safe and efficient financial system for all Australians.’

Download the update

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In his introductory comments, ASIC Chair James Shipton said the theme of this year’s forum, ‘Other people’s money’, was to remind the finance industry of its core function – to serve people – and its obligation to act efficiently, honestly and fairly.

‘Financial institutions must rise to this challenge,’ said Mr Shipton. ‘We do not want to see resistance and reluctance to the job that the community expects us to do as a conduct regulator and corporations law enforcer.’

In closing the annual forum, Mr Shipton added that Australia’s finance industry needed to embrace the concept of ‘first, do no harm’.

In what he termed the ‘fairness challenge’, Mr Shipton said everyone in finance must have the procedural discipline to ask, ‘Is this practice or product going to cause harm, be detrimental or have a negative consequence?’

‘I am not convinced this level of questioning and procedural discipline has been applied by the financial industry when developing, and reviewing, business practices and financial products,’ said Mr Shipton.

He added that financial systems not only need to be fairer – they must also be more inclusive.

‘Ultimately, we need a financial system that not only serves every segment of the community but also is one where those who work in it feel proud of being a part of it,’ he said. ‘Proud because there is a broader community purpose to what they do and proud because they are professional in how they do it.’

The forum, which attracted a record number of delegates, coincided with the 44th Annual Meeting of the International Organisation of Securities Commissions (IOSCO), hosted by ASIC in Sydney. IOSCO is the international body of regulators that oversee the world’s securities and futures markets.

A total of 415 international delegates attended the IOSCO Annual Meeting on 13-17 May 2019, which brought together thought-leaders from Australia and around the world. More than half of these IOSCO delegates also attended the ASIC Annual Forum and several were included in forum panel discussions to provide global regulatory perspectives.

Many countries’ financial regulators said they faced the same opportunities and challenges as ASIC, as global financial markets become more integrated.

For more information, read James Shipton’s ASIC Annual Forum introductory comments and closing remarks.

More on IOSCO

IOSCO was established in 1983. Its membership regulates more than 95% of the world’s securities markets in more than 115 jurisdictions. Securities regulators in emerging markets account for 75% of its ordinary membership. Visit www.iosco.org

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• a design and distribution obligations regime for financial services firms; and
• a product intervention power for ASIC

The design and distribution obligations will bring accountability for issuers and distributors to design, market and distribute financial and credit products that meet consumer needs. Phased in over two years, this will require issuers to identify in advance the consumers for whom their products are appropriate, and direct distribution to that target market.

The product intervention power will strengthen ASIC’s consumer protection toolkit by equipping it with the power to intervene where there is a risk of significant consumer detriment. To take effect immediately, this will better enable ASIC to prevent or mitigate significant harms to consumers.

These reforms were recommended by the Financial System Inquiry in 2014 and represent a fundamental shift away from relying predominantly on disclosure to drive good consumer outcomes.

ASIC Chair James Shipton said the reforms were a critical factor in the development of a financial services industry in which consumers could feel confident placing their trust.

‘These new powers will enable ASIC to take broader, more proactive action to improve standards and achieve fairer consumer outcomes in the financial services sector. This will be a significant boost for ASIC in achieving its vision of a fair, strong and efficient financial system for all Australians,’ he said.

‘This will also provide invaluable assistance to ASIC as we all seek to rebuild the community’s trust in our banking and broader wealth management industries. And we note the overwhelming level of support this attracted from across the Parliament.’

Mr Shipton also welcomed the amendments to the original legislation, which extended the reach of these reforms, providing a comprehensive framework of protection for most consumer financial products. It will also empower ASIC to intervene in relation to a wider range of products where ASIC identifies a risk of significant detriment to consumers.

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James Shipton

ASIC has welcomed the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and acknowledged its important work.

ASIC will consider the report carefully, particularly its recommendations on regulatory and enforcement practices. These recommendations, and the Government’s response, will inform ASIC’s priorities and strategic direction moving forward. The Royal Commission report identified ASIC’s enforcement culture as the focus of change needed at ASIC. This focus accords with ASIC’s change agenda, that has included the adoption of our ‘why not litigate?’ enforcement stance, the initiation of our Internal Enforcement Review and the enhancement of our governance structures.

ASIC notes the serious matters referred by the Royal Commission of possible breaches of financial services laws. Consideration of these matters will be prioritised. ASIC does not, as a general policy, comment on actual or potential investigations.

ASIC looks forward to working with the Parliament, the Government, APRA and other regulators to implement the reform agenda to ensure a fair, strong and efficient financial system for all Australians. In coming weeks, ASIC will release an update. This will outline the actions ASIC has already under way and the further steps it will implement moving forward to continue to strengthen our governance, culture and practices, and realign our enforcement and regulatory priorities.

Background

In its submission to the Royal Commission Interim Report, ASIC committed to accelerating enforcement activities, conducting more civil and criminal court actions against larger financial institutions and, as a starting point for all enforcement matters, asking the question “why not litigate?”

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