Speech by ASIC Chair Joe Longo to the House of Representatives Standing Committee on Economics, 11 October 2022.
Check against delivery
I am pleased to appear before the Committee once more and welcome Dr Daniel Mulino as the new Committee Chair. I am joined today by Deputy Chairs Sarah Court and Karen Chester, Commissioners Sean Hughes and Danielle Press, Chief Operating Officer Warren Day, Executive Director of Strategy Greg Kirk and our General Counsel Chris Savundra.
I recognise it’s been more than a year since our 2021 Annual report was published, so in addition to answering your questions on that document, I’ll briefly give an update on what we’ve been up to since.
As recovery from the pandemic continues, we have focused our attention on addressing regulatory and consumer protection issues in the evolving economic environment. With an expanded regulatory toolkit following the Royal Commission, we are committed to taking appropriate action against misconduct and reducing the risk of harm to consumers.
The new Design and Distribution obligations have been in effect for a little over a year, and we have already exercised our stop order power under the regime on 7 occasions where we have identified problematic conduct. The problematic conduct has included issuers casting the net too widely in terms of the consumers they are targeting, particularly when they are offering high risk or niche investment products that are likely to have narrower target markets and require greater controls on distribution. We have 10 targeted surveillance projects on foot, focused on sectors where we are seeing consumer harm from poor design and distribution practices.
We are actively examining misrepresentations based on greenwashing claims to support well‑informed investment decision making and to prevent consumer harms.
ASIC is continuing to shine a light on the inherent risks of crypto assets and will take appropriate action against crypto products causing harm to consumers within our regulatory perimeter. Promotion of these assets through popular and viral channels can make them appealing to investors, but there continues to be lack of public awareness of their highly volatile, risky and complex nature. We are supportive of government’s action to establish a regulatory framework in this space and will continue to work with Treasury and other stakeholders.
A new reportable situations regime commenced on 1 October 2021, expanding the breach reporting requirements for financial services and credit licensees. We have been monitoring reporting closely as industry settles into the new regime. This material is a critical source of intelligence. As the regime matures it should help ASIC become aware of non‑compliant behaviours earlier and to better identify emerging trends. Our first report on information received under this new regime will be published later this month.
Our regular enforcement work continues at high volume. It is informed by reports from the public, external administrators, auditors, other government agencies, media reports and breach reporting, as well as our own intelligence and surveillance activity. One of these inputs, reports of misconduct from the public usually number around 10,000 each year. We triage and prioritise these reports, using criteria informed by our strategic priorities and others matters to select those that will be subject to further consideration. Given ASIC’s finite resources, choices always have to be made about which of the many matters drawn to our attention can be pursued. Our challenge is to allocate our resources for maximum public benefit - to consumers, as well as more broadly ensuring the proper conduct of markets and industries.
Over the year, ASIC has continued to work on building capacity in the industry to prevent and address consumer harms. One focus over the past few years has been improving the industry’s approach to remediation, and I’m pleased to say another milestone has been reached recently with the release of our expanded remediation guidance. Through our supervision of remediation programs, we identified gaps and best practice opportunities to ensure the onus is on firms to provide fairer, more consistent and timely outcomes for consumers. The guidance strikes a balance between practical advice to the industry and clear incentives to comply – setting standards for good record keeping that allows problems to be identified and fixed earlier. We have, through our engagement with industry, achieved a return for an estimated seven million consumers in the order of $5.6 billion over the past 6 years.
We have been working on strengthening our organisational capability to ensure ASIC continues to be a fit for purpose regulator. Last year we commissioned an independent review of ASIC’s infrastructure and have implemented its key recommendations, including reviewing operational service level standards and updating our technology service delivery model. We established a dedicated regulatory efficiency unit to make it easier for businesses and other stakeholders to interact with us. For example, we are looking at improving our early investigation engagement. This includes meeting with entities ahead of commencing a complex or significant investigation. The focus will be on clarifying expectations associated with the conduct of the investigation (including fairness). We have commenced an ambitious digital transformation project, which will support ASIC to become a leading digitally enabled, data informed regulator.
I touched on the Financial Regulator Assessment Authority (FRAA) at my last appearance. FRAA’s report was released on 25 August, and we are working through the recommendations. We were pleased the FRAA acknowledged ASIC’s contribution to Australia’s financial system and found us an effective and capable regulator in the space, noting that we have the largest remit of any comparable regulator globally.
The FRAA made four recommendations around enhancing our use of data and technology, strengthening our engagement with stakeholders, enhancing our ability to measure effectiveness and capability, and continuing to broaden our mix of skill sets. These are areas we are working on right now.
ASIC’s Corporate Plan was launched on 22 August. It sets out our priorities and actions for the next four years. Along with our BAU regulatory surveillance and enforcement activity, we have identified four external priorities over this time, and eight strategic projects to support these priorities.
Our people continue to work diligently to ensure the breadth of ASIC’s enforcement toolkit is used to achieve fair and timely outcomes for consumers and to promote trust and confidence in Australia’s financial system.
We look forward to answering the Committee’s questions.