Market Integrity Update - Issue 77 - November 2016

Issue 77, November 2016

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ASIC signs fintech innovation agreement with fourth overseas jurisdiction this year

Innovation MediumIn early November, we signed an agreement with the Ontario Securities Commission (OSC) to support and promote financial technology (fintech) innovation in both markets.

Under the new agreement, innovative fintech companies will be able to draw on the combined resources of ASIC and the OSC to help reduce regulatory uncertainty and time-to-market. We have also agreed to share information about our markets, including on emerging market trends and regulatory issues arising from growth in innovation.

Earlier this year we signed agreements with the UK Financial Conduct Authority (refer: 16-088MR), Monetary Authority of Singapore (refer: 16-194MR) and the Capital Markets Authority of Kenya (refer: 16-359MR) aimed at helping innovative fintech businesses to enter into each other’s markets faster.

ASIC Chairman Greg Medcraft said ‘Innovation in financial services isn’t confined by national borders.

‘Since ASIC launched its Innovation Hub in 2015, we have seen a surge in requests by fintech start-ups seeking assistance about how to navigate the regulatory requirements.’

ASIC recently consulted on the development of a Regulatory Sandbox that would allow start-ups to test concepts without a licence: see Consultation Paper 260 Further measures to facilitate innovation in financial services. We are currently considering the responses to the consultation.

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Watch our latest market integrity report

Video MediumWe have published our latest twice-yearly report on the significant market integrity outcomes achieved through our supervisory, surveillance and enforcement activities. The report focuses on deterrence, standards and education, and behavioural change.

During the period January to June 2016, key activities included:

  • 15 enforcement outcomes (six criminal and eight administrative)
  • 22,874 trading alerts
  • one enforceable undertaking
  • 103 market surveillance inquiries, and
  • 32 market participant compliance reviews.

The report consists of a webpage and a short video. Market intermediaries are encouraged to circulate the video and webpage to their staff and clients to increase awareness of ASIC's actions and ongoing areas of focus.

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ASIC welcomes industry funding proposals

Funding MediumTreasury has issued a proposals paper on the introduction of an ASIC industry funding model. The proposed model will improve transparency and accountability – and drive economic efficiencies in the way resources are allocated within ASIC.

'ASIC has long believed that those who generate the need for ASIC’s regulation should pay for it, rather than the Australian public,' said ASIC Chairman Greg Medcraft.

 ‘Industry funding will also improve ASIC's transparency and accountability. That means business will better understand the job we do by having greater visibility of the cost of doing that job.’

We have worked closely with Treasury to develop the refined model for consultation. Details of the proposals and ASIC’s costs of regulating each industry sector can be found on Treasury’s website.

Roundtables will be held during the consultation period. Registration of interest for the roundtable meetings and any submissions to the proposals can be sent to

Submissions close on 16 December.

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Client money reforms for retail OTC derivatives

Money Fan (1)We have welcomed Government’s decision to proceed with 'client money' reforms for retail over-the-counter (OTC) derivatives.

The reforms will remove an exception in the client money regime. The exception allows Australian financial services (AFS) licensees to withdraw client money provided for retail OTC derivatives from trust accounts. Currently, the client money can be used for a wide range of purposes, including as working capital.

This exception places retail OTC derivatives clients at a greater risk of loss, particularly if the AFS licensee becomes insolvent.

The reforms will require AFS licensees to hold the client money in trust. In the event of insolvency, the money will be returned to clients and not paid to creditors. This requirement already applies to the majority of financial products and services under Australia's client money regime.

ASIC Commissioner Cathie Armour said 'The reforms to the client money regime will strengthen protection of client money that is provided by retail derivative clients. By improving protection for retail client money, the reforms will help to increase investor confidence in the Australian financial system'.

The reforms include giving ASIC the power to write client money reporting and reconciliation rules. The rules will apply more formal and consistent standards to industry; and assist ASIC to detect breaches in a more timely way.

Industry will have a 12-month transition period to implement the reforms, allowing time to adapt to the new regime.

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ASIC Annual Forum 2017 'Future Focus'

Speech Bubbles MediumRegistration for the ASIC Annual Forum 2017 is now open. Held over two days on 20–21 March 2017, the Forum will explore the balance between innovation and stability in our rapidly transforming financial system.

Increased competition, a growing appetite for digital solutions and public questioning of institutions are redefining the financial landscape. At the same time, global markets continue to be rocked by the unexpected. With such financial sector uncertainty, are we doing enough to future-proof our system? And what’s the right balance when planning for a future we can only begin to imagine?

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ASIC launches newsletter on corporate insolvency

Newsletter Medium (1)Broaden your understanding of ASIC’s regulatory priorities and activities!

We have launched a free quarterly newsletter for people with an interest in regulatory developments and issues affecting corporate insolvency markets.

The Corporate Insolvency Update will provide news and information about our priorities, guidance and other information relevant to the industry. Like the Market Integrity Update, it will be emailed directly to subscribers or available to view on our website.

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Stories from the beat

Typewriter MediumIn a recent insider trading case, ASIC’s Market Supervision team were able to take swift action following a prompt suspicious activity report (SAR) from a market participant.

On the day of a takeover announcement of a listed entity, the market participant formed the view that three newly established trading accounts were suspicious after they had purchased a large volume of shares in the target company before the announcement. All of the trading accounts had been opened within six days of each other; and all had registered addresses in close proximity to each other.

After conducting their usual inquires, the Market Surveillance team identified a connection between the accounts and to a mutual third party who appeared to be working for a subsidiary of the bidding company.

The matter was then immediately referred to ASIC's Market Integrity Enforcement team for formal investigation, which was commenced within days of receiving the SAR from the market participant. ASIC's investigation is ongoing.

More information about suspicious activity reporting obligations is provided in Regulatory Guide 238 Suspicious activity reporting (RG 238).

To help businesses and their staff comply with this obligation, we have designed an educational poster. We encourage you to print and display it in high visibility locations around your business, such as on trading desks, above the office photocopier and in your lunch room.

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Last updated: 30/03/2021 09:39