A statement by Greg Medcraft, Chairman Australian Securities and Investments Commission to the Parliamentary Joint Committee on Corporations and Financial Services, 14 August 2015.
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Good morning, Chairman.
Thank you for this opportunity to address the Committee.
Representing ASIC today are all of our Commissioners – Deputy Chairman Peter Kell; and Commissioners: Cathie Armour; John Price; and Greg Tanzer.
Supporting the Commission are Senior Executive Leaders: Warren Day, Greg Kirk, Louise Macaulay, Tim Mullaly, Michael Saadat, and Chris Savundra.
Chairman, I have a brief opening statement in which I wanted to discuss three issues:
- Capability Review;
- Recovering the cost of investigations; and
- Culture and ASIC's Strategic Outlook
Since we last met the Government has announced ASIC will be the subject of a Capability Review.
ASIC welcomes this review. It is a forward-looking review and will assess our ability to meet the Government's objectives and future challenges.
Crucially, it is also linked to the Government's consideration of the Murray Inquiry recommendation that ASIC’s regulatory activities be funded by industry as well as the other recommendations the Inquiry made relating to ASIC.
The Murray Inquiry also recommended each of the financial regulators undergo periodic capability reviews and that in light of the significant changes recommended for ASIC's funding, tools and powers, that we be the first regulator to undergo a capability review.
Looking at our current position, we consider we are effective and efficient within the resources we have.
Over the past few years, we have undertaken significant initiatives to enhance our effectiveness, and this process will continue, including through the Capability Review process. We currently have several transformational, self-improvement programs under way at ASIC.
We think the Review will further position ASIC to meet the needs of the Australian public in the future.
Capability Reviews are not unusual. Over the past three years, reviews have been undertaken for 19 Federal Government departments and agencies.
A number of international jurisdictions have done reviews of their public sector capability in recent years, including the United Kingdom, New Zealand and Canada.
Recovering the cost of investigations
Last month, ASIC announced it would now use its power to recover expenses and costs of its investigations.
Generally, ASIC pays the expenses of investigations it conducts. However, under s91 of the Australian Securities and Investments Commission Act 2001, ASIC may recover investigation costs where there has been a successful prosecution or civil proceeding.
To date, we have rarely recovered its investigation expenses and costs.
However, ASIC has reviewed its approach and consistent with User Pays principles, considers it should more frequently seek to recover the costs of an investigation from those that have caused those costs to be incurred.
Accordingly, ASIC will consider recovering investigation costs in each case where the legislative requirements are met.
The new approach will apply to investigations from 29 July 2015 as well as all investigations started before this date, where an outcome has not yet been agreed.
Culture in ASIC's Strategic Outlook
ASIC is soon to publish its Strategic Outlook for 2015-16.
At the core of this document will be the view that central to achieving our strategic objectives will be, as always, understanding behavioural insights of investors and gatekeepers and ensuring we have the right nudges to achieve these objectives.
For gatekeepers, the three key behavioural drivers are culture, incentives and deterrence.
In respect of culture, boards and management play a critical role in setting the culture of firms.
If we find a firm's culture is lacking it is a red flag that there may be broader regulatory problems.
ASIC will be addressing culture not just in markets but in financial service more widely and we will be assessing the link between culture and conduct.
The Strategic Outlook will be published in late August.
Chairman, those are the three substantive issues I wanted to mention. We are now happy to take questions.