With an increased public focus on the regulation of financial services arising from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (“Royal Commission”), ASIC’s Corporate Plan for 2018-2022 (“Corporate Plan”) will be of particular interest to the financial services industry as an indicator of what to expect in future.
The Corporate Plan sets out the priorities and direction of the companies and financial services industry regulator over the next four years.
ASIC Chairman James Shipton has stated that there is a need to “address systemic issues” and for industry to improve its “conduct by demonstrating greater levels of professionalism.”
The Corporate Plan has been structured around two ‘missions’, which cover more targeted action areas. The two ‘missions’ are:
a regulatory mission, focussed on the financial services industry; and
a registry mission that closely aligns with ASIC’s role as the administrator of the Corporations Act 2001 (Cth).
These missions also direct the medium-term focus of ASIC and are discussed in more detail below.
While the 2017-2021 Corporate Plan articulated a “detect, understand, respond” approach to regulation, the new Corporate Plan is reorientated on ASIC’s new guiding vision: “a fair, strong and efficient financial system for all Australians”.
In approaching its regulatory role, ASIC will take a “threat, harm and behaviour” approach to supervision and enforcement activities. This approach is supplemented by recent additions to ASIC’s enforcement powers and penalties to address compliance failures by regulated entities, responsible managers and Australian Financial Services licence holders with civil and criminal penalties.
Short-term Focus
The Corporate Plan outlines the short term (2018-19) areas of focus of the industry regulator. These are:
Potential harm from technology;
Poor culture and professionalism;
Culture, governance and incentives that can harm markets;
Practices that target financially vulnerable consumers;
Misalignment of retail product design and distribution with consumer needs; and
Increased global uncertainty.
These issues represent both emerging and long-standing concerns with the financial services industry and ASIC’s strategic planning framework. The Corporate Plan focuses heavily on taking action on unconscionable and misleading conduct, ensuring good governance, continued regulatory compliance, ensuring that the interests of consumers are central and considerations that may impact on the regulatory and policy environment.
Medium Term
As mentioned above, ASIC has grouped action areas under its two main missions.
Regulatory Mission
The regulatory mission is broken down into four areas. These are:
Change behaviours to drive good consumer and investor outcomes;
Act against misconduct to maintain trust and integrity in the financial system;
Promote strong and innovative development of the financial system; and
Help Australians to be in control of their financial lives.
The majority of the projects associated with these areas of action relate to the conduct and behaviours of the financial services industry, with an emphasis on addressing deficiencies in professionalism and competence, regulatory compliance, corporate governance, treatment of consumers, and handling of complaints. ASIC will commence new projects addressing these areas of action.
A significant number of the projects identified in the Corporate Plan are focused on new and developing areas of practice including crypto-currencies, FinTech, buy-now-pay-later practices, consumer credit, crowd-sourced fundraising, and globalisation of financial products and markets.
Registry Mission
ASIC’s registry mission is to “provide efficient and accessible business registers that make it easier to do business” and refine the existing company and financial services registers, transitioning some information across to the Australian Business Register, increasing the accessibility of the data held by ASIC, and becoming more accessible to those who wish to access data.
Of particular interest to AFS Licensees will be ASIC’s administration of the inclusion of additional information in the Financial Adviser Register from November 2019 under professional standards reforms.
Budget
ASIC has been provided with increased Federal Government Funds to expand its enforcement and surveillance capacity. ASIC has also begun the transition to an industry funding model that will see regulated entities pay for services in a manner more proportionate to the services they use and the level of regulatory oversight they receive from ASIC, with the first levy payments due in early 2019.
Measuring Performance
The Corporate Plan also provides for performance indicators based on a broad variety of metrics as a way of looking forward and ensuring the measures taken while implementing the Corporate Plan have quantifiable impacts on regulated sectors. These indicators are mostly linked to operational and government based data and engagement with relevant stakeholders in industry.
Conclusions
With the Royal Commission due to deliver its final report in February 2019, there is already an emerging emphasis on remedying and preventing the harms caused by the “unlawful and unethical conduct” highlighted at the Royal Commission’s hearings.
If you would like to know more about how your financial services business is affected by the Corporate Plan or upcoming regulatory changes, please contact Hillary Ray or someone in our Financial Services team.