I am pleased to appear before the Committee once more. I am joined today by Deputy Chair Sarah Court, and fellow Commissioners Kate O’Rourke, Alan Kirkland and Simone Constant, as well as Greg Yanco, Chief Executive Officer, Chris Savundra in his new role of Executive Director, Enforcement and Compliance, Calissa Aldridge, Executive Director, Markets and Peter Dunlop, our Chief Financial Officer.

We appreciate the Committee’s interest in the topics you have provided us ahead of this hearing, and I’ll make a few short remarks in relation to some of these.

ASIC’s enforcement

You asked us for an update on our enforcement work.

ASIC has had some important regulatory firsts in recent months, including the first win in a greenwashing civil penalty action, the first infringement notice issued to a market operator, and our first civil action against the ASX. We are taking strong action against market manipulation. We laid charges in an alleged ‘pump and dump’ conspiracy that used the messaging platform Telegram, with the defendants facing a maximum penalty of 15 years imprisonment and a fine of over $1 million. During our investigation ASIC took the unprecedented step of posting messages in the Telegram chat room to warn traders they may be breaking the law by seeking to organise stock price manipulation.

And we are pursuing large corporations. In September, ASIC’s action resulted in ANZ being ordered to pay a $15 million penalty for misleading customers about funds being available for withdrawal without incurring fees. Last month the Full Federal Court dismissed ANZ’s appeal against the judgment, and upheld the original finding that that ANZ breached continuous disclosure laws when undertaking a $2.5 billion institutional share placement in 2015.

Following an ASIC investigation, the Markets Disciplinary Panel (MDP) issued Macquarie Bank a record $4.995 million fine for its failure to prevent suspicious orders being placed on the electricity futures market.

Last week we commenced court proceedings alleging QBE Insurance Limited misled its customers about the value of discounts offered on certain general insurance products.

And on Wednesday we commenced proceedings against Oak Capital, for conduct we argue was unconscionable and designed to avoid consumer protections under the National Credit Code.

ASIC has more enforcement action due over the coming months targeting behaviour that has been detrimental to customers and the market.

Update on ASIC investigation in relation to ANZ’s role in AOFM bonds

Since February 2024, ASIC has been investigating suspected contraventions by ANZ in its role as joint lead manager and risk manager on an issuance of $14 billion 10-year Australian government Treasury Bonds conducted on 19 April 2023 by the Australian Office of Financial Management. Our investigation is continuing.

We recognise the investigation continues to attract significant public and media interest. To preserve the integrity of the investigation, it is not appropriate to provide ongoing commentary on the investigation.

Our investigation concerns suspected market manipulation and contraventions of a number of provisions of the ASIC Act and the Corporations Act. In August 2024, we expanded our investigation to include suspected contraventions relating to errors in ANZ’s reporting of secondary bond market turnover data to the AOFM.

We are giving this investigation the highest priority given the seriousness of the alleged misconduct and the potential for the alleged conduct to impact the interest payments of the Commonwealth on the bonds issued and therefore Australian taxpayers.

As we have said previously, we expect to form an internal view in the first quarter of 2025 about the suspected contraventions and whether any enforcement action should be taken.

Our AI work

In addition to the information provided in our submission, this week we released a report on our review of AI use by retail financial services and credit providers, where we found the maturity of governance and risk management practices is not keeping up with the nature and scale of AI use.

It is clear that work needs to be done - and quickly - to ensure governance is adequate for the potential surge in consumer-facing AI.

ASX CHESS replacement

We continue to focus on our ASX supervision. We have reflected on our supervisory approach and have carefully considered the Committee’s recommendations in its April 2024 Report on its inquiry into CHESS Replacement. We are enhancing our capability and expertise on technology delivery, change programs, and our overall supervisory expertise.

In our submission to the Committee, we noted ASX has changed the status of the CHESS replacement project from green to amber. ASX reported that this is due to delays in the product acceptance testing and the data platform build for CHESS replacement.

It is critical that risks are actively identified by ASX, managed and tracked, and appropriately escalated. It is important that ASX’s risk culture requires and supports the transparent identification, reporting and escalation of risks. The replacement of CHESS is ultimately the responsibility of ASX.

ASIC has taken short term steps to enhance our monitoring of the CHESS replacement project, and ASIC and the RBA are closely monitoring ASX’s governance arrangements for the CHESS Replacement program to ensure ASX manages the risks associated with the implementation.

As I mentioned, in August we commenced proceedings in the Federal Court against ASX for allegedly making misleading statements related to the CHESS replacement project. ASX’s statements go to the heart of trust in the integrity of our markets. When these fall short, the consequences in the market can be wide-ranging.

ASIC will not hesitate to take further regulatory action, including the use of our new powers under both the FMI reforms legislation and competition in clearing and settlement legislation, to hold ASX accountable for the CHESS replacement project and meeting stakeholder and community expectations.

Quality of audit

In addition to the information in our submission, this week we published our annual integrated report on financial reporting and audit surveillance. Our review identified improvements needed across audit approaches and financial reporting, resulting in financial adjustments of $1.88 billion and outlined ASIC’s audit-related enforcement outcomes.

We recognise this committee’s work and recommendations concerning auditing profession’s approach to conflicts of interest. We are continuing to evolve our approach to this work. This week ASIC wrote to almost 3000 registered company auditors and the CEOs of six large auditing firms advising that we are commencing a review into auditors’ adherence with independence and conflict of interest obligations under the Corporations Act.

You can expect we will use our compulsory information-gathering powers where we identify an issue. It may also extend to seeking information about the systems and controls relied upon in audit engagements to ensure compliance with independence and conflicts of interest requirements.

Public and private markets

As a modern, confident, and ambitious regulator, we work proactively to identify and respond to developments that could affect the integrity of this system, or impact consumers and investors. Our efforts have ensured Australia has remained one of the cleanest listed equity markets in the world for the past decade, where Australian companies can do business with certainty, and Australians can be confident to invest.

As this Committee would know, public listings have been on the decline. At the same time, private markets globally have experienced significant growth. There are estimates that global private capital assets under management are over USD$14 trillion – triple a decade ago. This is an estimate as there are gaps in the data to size and monitor this sector. Australian private capital funds have also experienced significant growth and are becoming an increasingly important source of funding for our economy. Major superannuation funds have over 20% of their assets invested privately.

This year we have been leading a conversation with market participants about the role of public and private markets. The Commission has been involved in a range of panels and roundtables recently, examining the changing dynamic between public and private markets, including the growth of superannuation, to ensure they continue to deliver good outcomes for consumers and support the efficiency of our capital markets. I would be happy to discuss these in further detail.

In coming weeks, we will release a discussion paper, along with ASIC-commissioned research which explores the current state of Australia’s financial markets.

ASIC’s transformation journey

Last week at a separate hearing I reflected on ASIC’s journey of growth and transformation across the past three years, including the most significant organisational redesign of the agency in 15 years.

ASIC’s transformation as an agency has continued to deliver results, including:

• enhanced collaboration across teams with quicker times for matters to progress to enforcement and compliance action
• improved data analytics and surveillance capabilities, underpinned by our long-term approach to becoming a leading, digitally enabled and data-informed regulator, and
• strengthened engagement with external stakeholders to listen to their views and set clear expectations of those we regulate.

You will have seen our recent announcements about key appointments to our senior executive leadership team. Following an international search, Peter Soros will be joining ASIC in November as Executive Director Regulation and Supervision. And as you would have noted from the introductions, Chris Savundra has been appointed to the role of Executive Director Enforcement and Compliance, effective from Monday this week.

We will continue to focus on ASIC’s transformation, including a strong focus on backing our dedicated people, and investing in data, systems and technology.

I am optimistic about ASIC’s future. Our renewed Executive Leadership Team and focus on building a strong culture will set the agency up to evolve and respond to new challenges in our operating environment and to the threats and harms that emerge.

We look forward to answering the Committee’s questions.