I am pleased to appear before the Committee once more today. I am joined by Deputy Chairs Sarah Court and Karen Chester and Commissioner Kate O’Rourke. Also present today are Chief Executive Officer Warren Day and our General Counsel Chris Savundra, as well as Executive Director of Markets Calissa Aldridge and Acting Senior Executive Leader for Market Infrastructure Ben Cohn-Urbach.
Joining us online are Executive Director of Regulation and Supervision Greg Yanco, Senior Executive Leader Financial Advisers and Investment Managers Leah Sciacca and Senior Executive Leader Superannuation and Life Insurance Jane Eccleston.
We haven’t appeared before this Committee since the conclusion last month of Danielle Press’ term as an ASIC Commissioner. I’d like to take this opportunity to thank Danielle for her service and her wise counsel. Danielle’s leadership has left a positive impact on many areas of ASIC’s remit, including superannuation, life insurance, financial advice, credit, and markets. Danielle was pivotal in establishing ASIC as the conduct regulator for the superannuation sector – bringing to this work her extensive previous experience as an industry leader and expert. Her inclusive leadership has helped to foster a respectful working culture at ASIC that values contributions and positive working relationships, including with our peer regulators and industry.
Danielle’s great work will be continued with ASIC entering a new period for the Commission. Commissioner O’Rourke joined us last month, and Alan Kirkland and Simone Constant will take up their appointments as Commissioners in November. I look forward to working closely with our new Commissioners to progress ASIC’s important work.
Release of ASIC Annual Report and recent enforcement action
I understand the Committee is particularly interested in the ASX CHESS replacement project today, so I won’t spend time a lot of time on our broader work, except to say our Annual Report published last Friday shows ASIC has maintained strong enforcement outcomes, and I’m proud of the significant progress we have made on each of the ambitious priorities we set for ourselves.
And our enforcement record has remained strong this quarter also. Last Friday, for example, we won a landmark continuous disclosure case against ANZ relating to a $2.5 billion institutional share placement in 2015. The matter has a long and complex history and this significant decision demonstrates ASIC’s unwavering tenacity in pursuing breaches of the law to ensure market integrity.
We will provide the Committee with a more comprehensive outline of our regulatory and enforcement work when we appear before the PJC on 3 November.
ASX CHESS replacement
I’ll turn now to the ASX CHESS replacement project. Since we last appeared before the Committee in June, we have continued our joint supervision with the RBA on ASX, including of current CHESS and the CHESS Replacement Project. We support the RBA’s recent 2022-23 assessment of ASX’s Clearing and Settlement facilities against the Financial Stability Standards and note the downgrading of some aspects of ASX’s governance and risk management.
The findings are consistent with ASIC’s observations and complement a range of regulatory actions ASIC has taken with respect to ASX. As the operator of critical national infrastructure, ASX must be held to the highest regulatory standards. We will continue to use all available regulatory measures to ensure ASX Clear and ASX Settlement comply with our expectations and obligations under the Corporations Act. We will work closely with the RBA to do so.
You may recall that we issued ASIC notices requiring ASX to provide three special reports and corresponding audit reports. The first, which we discussed with the Committee in June, was on support and maintenance of current CHESS.
The second was released in August and outlines ASX’s response to the findings and recommendations of the ASX CHESS Replacement Application Delivery Review undertaken by Accenture last year. The audit report suggests ASX’s response plan and governance is broadly appropriate but makes four recommendations to support timely and quality delivery. ASX is implementing these recommendations.
ASX has now provided ASIC with the third special report on their current portfolio, program and project management frameworks and an assessment of those frameworks against internationally recognised standards. The external audit of this special report is due by 31 October. This is an important benchmark of ASX’s current program delivery capabilities. ASIC will take a holistic approach to considering the three special reports to determine whether further regulatory action is required.
These reports are in addition to the licence conditions ASIC imposed in 2021 that require ASX to appoint an independent expert approved by ASIC to assess whether ASX’s assurance program for the replacement of CHESS is fit for purpose, identifying any shortfalls, and reporting regularly to ASIC.
As outlined in our recent submission to this inquiry, I hosted an industry roundtable in early August which was convened to address longstanding industry concerns over the CHESS Replacement Project and the adequacy of ASX’s stakeholder engagement and governance, including ASX’s management of intragroup conflicts of interest. The roundtable comprised a small group of recognised industry leaders, and included the then ASIC Commissioner Danielle Press and the now Governor of the Reserve Bank of Australia, Michele Bullock. The discussion was a productive one, and I believe set the tone for a positive direction on engagement and governance.
At ASIC’s request, ASX has now established a Cash Equities Clearing and Settlement Advisory Group (CS Advisory Group), led by independent Chair Alan Cameron AO. In the short term, the focus of this Advisory Group will be on the CHESS replacement project. However, it is intended that the Group will over time provide advice in relation to key strategic clearing and settlement matters, such as T+1, and provide input into the governance of ASX’s clearing and settlement facilities. We requested that ASX establish the CS Advisory Group because our view is that genuine stakeholder engagement is vital to the success of CHESS Replacement and is necessary to achieve the best outcome for the market, for listed companies and investors.
Together with the RBA, we have issued a letter of regulatory expectations to ASX Clear and ASX Settlement, requiring them to resource, consult and engage with the CS Advisory Group in good faith and in the public interest. The regulators will actively monitor the engagement of these ASX entities with the CS Advisory Group and the ASX CS Board’s response to advice provided by the group.
Finally, we welcome the passage of the Competition in Clearing and Settlement Reforms. Following an initial determination by the Minister, these reforms will enable ASIC to make rules that deal with the activities, conduct and governance of CS facility licensees, their associated entities and other persons specified by regulations. This may include governance arrangements and handling of conflicts of interest, building on the RBA’s Financial Stability Standards. We will of course engage in extensive consultation before making any such rules. ASIC is committed to using its new powers on a timely basis to facilitate outcomes that are consistent with those expected in a competitive market for clearing and settlement services.
I look forward to the Committee’s questions.