Statement of expectations: April 2014

This Statement outlines the Government’s expectations about the role and responsibilities of the Australian Securities and Investments Commission (ASIC), its relationship with the Government, issues of transparency and accountability and operational matters. It forms part of the Government’s commitment to good corporate governance of agencies and reducing the regulatory burden on business and the community.

ASIC plays a key role in achieving a sound and effective financial and corporate regulatory framework. Its objectives include to maintain, facilitate and improve the performance of the financial system (including fair and efficient markets), promote the confident and informed participation of investors and consumers, and conduct an efficient registry.

It is imperative that ASIC act independently and objectively in performing its functions and exercising its powers as set out in the Australian Securities and Investments Commission Act 2001 (ASIC Act). Nevertheless, the Government expects that ASIC take into account the Government’s broad policy framework, including its deregulation agenda, in performing its role and meeting its responsibilities.

The Government’s deregulation agenda

The Government is committed to reducing red tape and compliance costs for business and the community as a critical step towards improving Australia’s productivity.

The Government is overhauling the process for creating, implementing and reviewing new regulation. This includes a process within Government whereby the costs and benefits of additional regulation are carefully balanced, and the costs of new regulations are offset.

The Government expects that ASIC will look for opportunities to reduce compliance costs for business and the community and contribute to the Government’s $1 billion red and green tape reduction target.

The Government also expects that ASIC will comply with the Government’s enhanced Regulatory Impact Analysis requirements for all regulatory proposals, including considering the impacts of regulation on business and the community and costing proposals before they are introduced using the Regulatory Burden Measurement framework.

Enhancing the effectiveness and efficiency of key economic regulators including ASIC will make a major contribution to the deregulation agenda and help to boost productivity.

The Government expects that ASIC will act in accordance with regulatory best practice in its decision-making, policies, processes and communication practices to maximise effectiveness, efficiency and transparency, and minimise compliance costs. ASIC should regularly review its policies and procedures to identify improvements to achieve these goals.

The Government’s preference is for principles based regulation that identifies the desired outcomes rather than prescribing how to achieve them. An outcomes based approach is more likely to accommodate change within the economy, allow for innovation and enterprise and reduce compliance costs by allowing regulated entities to determine the best way of meeting regulatory objectives.

The Government also considers that regulators should adopt a risk-based approach to compliance obligations, engagement and enforcement, allowing for proportionate approaches suited to the size, nature, complexity and risk of regulated entities. This allows regulators to achieve their objectives more efficiently and reduce the overall regulatory burden, particularly for small businesses. This approach also recognises that it is not possible or efficient to eliminate all risks and that trade-offs in risk reductions are necessary.

The Government will provide ASIC with further detail about a whole of government risk management framework and expectations for ASIC’s performance against specific performance indicators in the second half of 2014.

Relationship between ASIC and the Government

The Government recognises and respects the statutory independence of ASIC and its responsibility for financial and corporate regulation as provided by statute. Confidence in the regulatory framework requires that ASIC is, and is seen to be, exercising independent judgment about the application of the regulatory framework to individual circumstances.

Nevertheless, ASIC was established to administer regulatory frameworks that implement government policies and priorities relating to business regulation generally and financial and corporate regulation in particular. The Government has primary responsibility for setting financial and corporate regulatory policy. ASIC should consider the outcomes or recommendations of relevant Government established panels, reviews or inquiries.

Where ASIC has powers to make orders or rules, modify the law or make exemptions, and the exercise of that power would have significant implications for the market or regulated population, the Government expects that ASIC will consult as appropriate with stakeholders and the Government. ASIC should take into account the Government’s broad policy framework and have due regard to minimising costs to business without compromising commercial certainty.

Relationship with the responsible Minister

ASIC plays an essential role in ensuring that the Government is well placed to respond promptly to issues that may arise in financial and corporate regulatory policy, including problems ASIC has encountered in performing its regulatory functions.

Another key role of ASIC is to provide Treasury portfolio Ministers with accurate and timely advice on significant issues in its core area of business. Significant issues might include: matters for which the Government is likely to be accountable in Parliament; important ASIC operational or budgetary issues; and ASIC’s decisions regarding the appropriate action for it to take following substantial problems or disruption in the market, including a substantial breach of the corporate regulatory framework.

Relationship with Treasury

Treasury’s key role is to support and advise me and other Treasury Ministers in our responsibilities by being the principal source of advice on a wide range of issues including policy development and the performance of the regulatory system.

The Government expects that Treasury and ASIC will maintain a close relationship. Treasury takes into account the views and experience of ASIC when considering and advising on changes to financial and corporate policy and legislation to facilitate consistency between the objectives of legislation and its practical implementation. By advising Treasury on the operational implications of Government policy initiatives, ASIC contributes to policy development.

All information, briefing, press releases and correspondence provided to Ministers by ASIC should be copied by ASIC to the Secretary to the Treasury. ASIC should also keep the Secretary to the Treasury appropriately informed of significant high level meetings between ASIC and Government Ministers and other key policy figures.

ASIC should advise Treasury about changes to legislation that in ASIC’s opinion would assist in improving the regulatory framework and minimising compliance costs for business and the community.

Regulatory cooperation

The Government expects that ASIC will maintain robust, effective and collaborative working partnerships with other Commonwealth and State and Territory agencies, as well as ASIC’s counterpart regulators in overseas jurisdictions, to ensure the proper functioning of Australia’s regulatory framework. ASIC should also avoid the duplication of the supervisory activities of other regulators, and should consider whether outcomes could be achieved by using existing regulation administered by another regulator, in order to ensure an integrated regulatory framework and reduce compliance costs.

Transparency and accountability

ASIC was established as an independent body to administer the financial and corporate regulatory framework. Nevertheless, ASIC operates as part of the Australian Government and is accountable to the Parliament, and ultimately to the public, through the Treasury Ministers, the Parliamentary Committee process and the tabling of its annual report.

The Government expects ASIC to have an open and sound working relationship with the entities that it supervises. It is important that industry participants are encouraged to communicate considered and candid views to ASIC in order to enhance the regulatory framework and outcomes, and minimise compliance costs.

Organisational governance and financial management

ASIC has capacity to employ staff under the Public Service Act 1999 (PSA) as well as under the ASIC Act. Under the PSA, agencies are required to uphold and promote the APS Values. All APS employees are required to adhere to the APS Code of Conduct. ASIC is also required to comply with the APS Bargaining Framework in relation to APS employees.

The requirements for ASIC’s financial management are set out in the relevant legislation and the Finance Minister’s Orders. In this regard, I note that ASIC must comply with the Government’s recent requirements in relation to approval for overseas travel. The Government expects that ASIC will continue efforts to secure improved efficiency in their operations and demonstrate value for money for the services that it delivers.

Conclusion

The Government’s vision is for ASIC to be a high performing and responsive agency that administers a principles based regulatory framework in a way that minimises compliance costs for business and the community, provides stability, is efficient and effective, and that balances the objectives of ASIC’s statutory objectives set out in the ASIC Act.

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Last updated: 23/03/2016 03:08