FSI grants ASIC greater powers


By Elizabeth Somerville

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The federal government would strengthen ASIC’s toolkit and provide the corporate regulator with product intervention powers, it said in its response to the Financial System Inquiry today.

In response to recommendation 29 on strengthening ASIC’s funding and powers, the government agreed to strengthen the regulators enforcement tools in relation to the financial services and credit licensing regimes.

It said it would do that by developing legislative amendments that would enable ASIC to approve changes of licensee control, consider a broader range of factors in determining whether an applicant satisfied the ‘fit and proper’ test to be granted a licence and impose conditions on firms to address concerns about internal systems relating to serious or systemic conduct, inclusive of external reviews.

It would also review ASIC’s enforcement regime, including penalties and the financial services licensing breach notification framework in 2017.

However, the government said it did not support the creation of a new Financial Regulator Assessment Board.

“We consider that new requirements in the Public Governance, Performance and Accountability Act 2013 and the government’s Regulator Performance Framework provide avenues to strengthen regulator accountability along with other existing mechanisms such as parliamentary hearings,” it said.

“We will reconstitute the Financial Sector Advisory Council with refreshed terms of reference to include providing advice on the performance of the financial regulators by the end of 2015.”

It said it would update the regulators’ statements of expectations in the first half of 2016, which would see it provide a statement of expectations to the Payments System Board for the first time.

The government also agreed to periodic consultation on the regulator’s capabilities, which followed the commencement of a capability review of ASIC in July 2015.

“We will consider the inquiry’s recommendations on adopting a three-year funding model for APRA (Australian Prudential Regulation Authority) and ASIC and the operational flexibility and staffing arrangements for each of the financial regulators after the ASIC capability review is completed,” it said.

In addition, the government agreed to implement periodic reviews of competition in the financial system.

“We will task the Productivity Commission to review the state of competition in the financial system by the end of 2017, three years after the completion of the inquiry," it said.

"Subsequent periodic reviews will be undertaken as appropriate.

“We support inclusion of competition in ASIC’s mandate and we will develop legislation to introduce an explicit reference to consideration of competition in ASIC’s mandate in the second half of 2016.”

It was also addressing barriers to cross-border trade in managed investment schemes through the establishment of an Asian Region Funds Passport, which would be legislated to give effect to the passport in the second half of 2016, it said.

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