The plan aims to give all stakeholders an insight into how the regulatory body will use its resources to better protect investors and consumers. ASIC is facing these challenges using a ‘detect, understand, respond’ approach. To detect potential issues, ASIC will undertake surveillance that targets areas with the greatest risk to investors, consumers and markets. ASIC will interpret the surveillance by using its technology, data management and analytics capabilities, with the response depending on the issue ranging from enforcement and regulatory action to policy advice.
For each of the challenges, ASIC has outlined new projects that it will undertake. It is valuable to know what these projects are, especially if you are heavily involved in a particular area ASIC is targeting.
Challenge 1: culture and conduct
ASIC has highlighted monitoring of compliance with continuous disclosure obligations by market operators as a focal point. ASIC wants to be sure that market operators like ASX are assisting ASIC in maintaining high standards within our markets. ASIC will also be implementing new standards for the admission of more complex products by retail exchange market operators. Finally, ASIC will be gathering data on life insurance policies for a future review of the industry-led reform package that will start on 1 January 2019.
Challenge 2: building financial capability
ASIC will support investor and consumer decision making through the National Financial Literacy Strategy and other financial education programs, including in schools and universities. ASIC is particularly concerned with the financially vulnerable people and will be paying close attention to areas that seem to damage financially vulnerable people the most. Two areas highlighted in the plan are mortgages and insurance. ASIC will be surveying reverse mortgage selling practises to older Australians and those approaching retirement, as well as the practises of insurers. Another concern is investor knowledge of the risks involved with investing and trading hybrid products. Therefore, ASIC plans to focus on market intermediaries’ sales and distribution practises relating to hybrids.
Challenge 3: digital disruption and cyber resilience in financial services and markets
ASIC is keen on facilitating fintech in a way that will enable investors and consumers to benefit whilst managing the risks to trust, confidence and market integrity inherent in digital disruption. ASIC will be paying particular attention to crowd sourced funding and market lending as part of the managed investment scheme sector.
To ensure we have the safest and most efficient market operators as possible, ASX’s systems and controls to combat cyber threats will be assessed over the coming period. New technologies will require development by ASX in all areas, and ASIC wants to ensure ASX’s systems are adequate.
Challenge 4: globalisation of financial markets, products and services
To assist cross-border activities whilst managing the risks associated with increased globalisation, ASIC is increasing its presence in the international regulator network. ASIC is contributing to the work of international regulatory bodies such as the International Organization of Securities Commissions (IOSCO), and is hosting the 2019 IOSCO conference.
To help combat the issues associated with globalisation, ASIC is broadening its surveillance and enforcement approach for fixed income, currency and commodities markets, including a framework for international engagement on FICC market supervision.
Challenge 5: Structural and demographic change in our financial system enhancing the role of market-based financing
As our demographic changes, the way people engage with financial products and services will change. Due to increases in superannuation amounts the role of market-based financing will be enhanced. Although no specific strategies have been announced by ASIC to address this challenge, it is a challenge that will be in the foreground ASIC’s decision making process over the next four years.
If you are concerned about any of ASIC’s new projects or would like more information, please feel free to contact someone from our Financial Services team.