Opening statement by ASIC Commissioner Cathie Armour at the House of Representatives Standing Committee on Economics, 10 September 2021, Parliament House, Canberra.

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Good morning Chair and Committee members.

I am joined today by Commissioner Danielle Press.

I will start by explaining ASIC’s role in regulating acquisitions of control in regulated Australian entities. ASIC’s role extends to the regulation of acquisitions in public companies, where the public company is either listed on an Australian exchange or has more than 50 members. It also extends to listed registered managed investment schemes.

Our role is primarily focused on the regulation of control of these particular entities. We seek to ensure that the acquisition of control in a regulated entity occurs within the limits set in the Corporations Act. These limits restrict a person from acquiring more than 20% of a regulated entity. The 20% limit applies collectively to both the person’s interests and to the interests of any associates of that person.

A person and their associates may acquire more than 20% of a regulated entity by making use of certain exceptions. These exceptions include takeover bids, schemes of arrangement and seeking shareholder approval. ASIC oversees the conduct of these transactions.

Our role also includes ensuring that investors are informed about the persons who may influence or control an entity. A person is required to keep the market informed about their interests in a listed company. Disclosure is required when the person’s and their associates’ interests reach 5% and when those interests increase or decrease.

In our role in regulating the acquisition of control, our focus is on ensuring that the acquisition of control occurs in an efficient, competitive and informed market. We also seek to ensure that there is transparency about the persons who control an entity, and that all investors are given an equal opportunity to benefit from a control proposal.

ASIC supports measures that promote these objectives.

Disputes about the acquisition of control or substantial interests in regulated entities are generally heard by the Takeovers Panel. The Takeovers Panel has the power to declare circumstances relating to the acquisition of control or a substantial interest as unacceptable. The Takeovers Panel also has the power to make orders to address those circumstances. ASIC may apply to the Takeovers Panel where it considers that circumstances regarding control of a regulated entity constitute unacceptable circumstances.

More broadly, ASIC also plays a role in regulating various participants in the Australian markets.

Our work includes supervising market intermediaries to ensure that they meet their regulatory requirements, the supervision of real-time trading on markets by financial market participants, and assessing how effectively authorised financial market operators are complying with their legal obligations to operate fair, orderly and transparent markets. We work to make sure that markets remain fair and orderly so that investors can continue to manage risk and companies can raise capital with confidence.

In relation to market investors, there are a variety of obligations and prohibitions that are designed to ensure that trading in financial markets is fair and efficient. For instance, the prohibition on insider trading.

However, beyond these issues ASIC’s role is limited. In particular, it is not generally ASIC’s role to judge the appropriateness of investment decisions made by investors in the financial markets. This is so, even where we do have a significant role in relation to regulating other aspects of conduct by types of market investors.

An example is superannuation funds. There are a range of obligations that apply to superannuation funds under the Corporations Act and the Superannuation Industry (Supervision) Act.

ASIC regulates trustees of superannuation funds together with APRA.

In making investment decisions, superannuation fund trustees need to have regard to their duties to members and specific obligations. This includes the duty to act in the best financial interests of members.

But ASIC’s role does not involve providing any investment guidance or advice to superannuation trustees. Under the current regulatory settings trustees have autonomy in relation to making decisions about investments.

Thank you again for the chance to appear at this hearing of the Inquiry.

We would be pleased to take the Committee’s questions.