Brave new world or return to fundamentals?
A presentation by Jillian Segal, Deputy Chair, ASIC, to the Corporate Law Teachers' Association, Melbourne, 12 February 2001.
New economy, old economy, tech stocks and dot.coms, clicks and mortar… this is the new language for the 21st century. The online revolution is profoundly reshaping our financial services market place. Financial products and many financial services are often in essence about pieces of information – debit, share register, credit, bank account, etc – so they are a natural for the digital world. The Internet is a major driver in the way those products are bought and sold and the services delivered. It is bringing newer and more efficient ways of manufacturing and delivering financial products. E-time has dramatically decreased the time to bring these products to market. As the Internet continues to mature with greater speed and bandwidth, it will become yet another infrastructure, ever present without our needing to think about it - much like electricity.
Financial portals are now linking organisations, products and services in ways that were not conceivable a few years ago. New business models are emerging and we now see the lines blur between, for example, financial institutions, telecommunications providers and the media.
These models involve new channels for distribution, and a new and different focus on customer relationships as investors learn to self manage information which they previously did not have access to. Faced with more options, consumers are becoming more demanding and less loyal and, in response, industry is providing increasingly sophisticated technologies that offer a diverse array of financial products and services to capture and hold clients.
I want to share some thoughts with you today about what the new economy and all the changes it has already brought to the financial market place mean for us as a financial services regulator in this period of transition.
Let me start with a broad generalisation: in many ways our core activities have not changed at all. What was poor or unacceptable or illegal in the so-called 'old economy' remains so in the online world. From the regulator's perspective, the new economy does not mean new rules. We are still responsible for the variety of public policy outcomes that the community looks to us for: consumer protection and market integrity in the financial markets. This means keeping the market for financial goods and services as clean and free from abusive practices as we can; helping financial consumers to look after themselves; and contributing to the reputation and efficiency of a robust financial sector in Australia. That is our job under our legislative mandate.
However, this simple vision changes once you drill down into the details. We would be foolish to imagine that regulatory rules and practices designed for a non-digital world can all easily apply in the e-commerce context. The job of the regulator is to be constantly on the look out for 'translation' problems – where rules and processes will need to be translated into elanguage so they can play a meaningful part in the e-world.
We are still in a transition and have to straddle both old and new worlds. To help us do that, we have, over the last couple of years, tried to articulate a set of objectives to guide our work in e-commerce. In our latest version of this, we see our job in this transitional phase as building a regulatory and business environment where:
- consumers of e-commerce financial products and services can be confident that their interests are properly protected
- industry participants can confidently plan and develop e-commerce initiatives
- we continue to enhance our abilities as an effective and credible regulator in the ecommerce context
- regulatory outcomes will not depend on the medium used.
In my address today, I want to delve into some of the detail of how we have been trying to achieve these objectives. First, I will look at new economy companies: in particular, the impacts of financial reporting, issues with Initial Public Offerings (IPO) and the like. Secondly, I will give you a brief excursion into ASIC's approach to e-commerce in relation to policy, consumer protection, and enforcement.