ASIC Market Supervision Update Issue 39
Reference checking of prospective employees
ASIC would like to remind participants and their representatives of some of the factors worth considering when employing or engaging new staff, to assist with the promotion of strong recruitment practices.
Appropriately prudent financial services firms should have strong internal compliance arrangements, and are subject to a robust statutory licensing regime. Such arrangements aim to ensure that people working in the financial services industry meet high standards of professionalism and competence. Firms should seek to act in accordance with these standards, by both seeking and providing reasonable, objective, relevant, factual, accurate and balanced information for reference checks.
Participants should refer to Reference Checking in the Financial Services Industry, a handbook first produced by Standards Australia in 2006 with ASIC's contribution and assistance. It provides guidance on reference checking, which may be used as a framework for a reference checking process within the financial services industry, as well as additional information on relevant legislation, regulations and reference documents.
Firms should also keep in mind Regulatory Guide 104 Licensing: Meeting the general obligations (RG 104) and Regulatory Guide 146 Licensing: Training of financial product advisers (RG 146) which are both relevant, and are available on the ASIC website.
Trades with price improvement: Not permissible for on-market buy-backs when acting on behalf of the buy-back issuer
ASIC would like to remind market participants of their obligations under the Corporations Act 2001 (Corporations Act) as well as the ASIC market integrity rules (the rules), in executing on-market buy-backs on behalf of listed corporations and responsible entities of managed investment schemes
Section 257B(6) of the Corporations Act states that 'A buy-back is an on-market buy-back if it results from an offer made by a listed corporation on a prescribed financial market in the ordinary course of trading on that market'. A comparable provision for conducting on-market buy-backs by responsible entities of managed investment schemes is set out in section 601KH(3) of ASIC Class Order [CO 07/442] On-market buy-backs for ASX-limited schemes.
ASIC has provided clear guidance in Regulatory Guide 223 Guidance on ASIC market integrity rules for competition in exchange markets (RG 223), that transactions relying on the trade with price improvement exception, that is effected other than on an order book, are not 'in the ordinary course of trading' and therefore, does not fall within s257B(6) of the Corporations Act for a listed corporation conducting a buy-back. RG 223 further provides that transactions relying on the trade with price improvement exception do not fall under the terms of ASIC relief for buybacks by responsible entities of managed investment schemes under [CO 07/422] (see RG 223.195).
ASIC will continue to monitor trades executed by market participants that are inconsistent with their obligations in the Corporations Act, the rules and the guidance set out above.
Expressions of interest for new portal system
ASIC is currently considering expressions of interest for its new Market Entity Compliance solution. The response period for Requests for Expressions of Interest closed on 14 October.
The Market Entity Compliance solution will enable key outcomes for ASIC, Market Participants and Market Operators, namely:
- Enhanced Information Management, through a single repository for ASIC market participant and operator information, and the provision of self-service capabilities to participants to update their information.
- Enhanced Compliance Management, through the online management of regulatory obligations by market participants and operators, and all information related to the management of regulatory obligations being accessible by ASIC from the single repository. There will also be the capability for market participants and operators to view all current and historical interactions with ASIC.
- Enhanced collaboration and communication between ASIC and market entities through online capabilities to enable internal collaboration for Market Participants and operators prior to their submitting information to ASIC. This will enhance ASIC's communication with Market Participants and operators.
The Market Entity Compliance solution is one part of the FAST (Flexible Advanced Surveillance Technologies) system, which allows ASIC to efficiently and flexibly adapt to a future that will include greatly increased message traffic, new technologies and trading techniques, increased competition between trading venues, and the increasing globalisation of capital markets.
Market participants should contact ASIC for market integrity issues and ASX and Chi-X respectively for operational issues. Contact ASIC’s Market and Participant Supervision group on 1300 029 454 and you will have these voice menu options:
- Option 1 for real time market matters
- Option 2 for other market related matters
- Option 3 for Participant enquiries or matters
- Option 4 for Market wide announcements.
Or you can reach the Market and Participant Team by email firstname.lastname@example.org, or through your relationship manager.