Markets participants contribute to effective market regulation
Published by the Stockbrockers Association of Australia in the Stockbrokers Monthly, May 2015.
ASIC Relationship Managers represent an important link between the regulator and Market Participants. They are the first point of contact for Participant queries and a source of knowledge about regulatory obligations and developments for Participants. Likewise, Participants are a vital source of business and industry intelligence for ASIC.
Relationship Managers gather information from Participants in two main ways. These are Risk Assessment Detection and Response visits (RADARs) and Compliance Liaison visits. Both involve a voluntary request for information, rather than the exercise of ASIC's statutory information gathering powers. However, in ASIC's experience, Participants are wholly understanding of the need for these meetings and willingly participate.
RADARs are conducted with all Participants on a three-year cycle (although they may occur more frequently if circumstances necessitate). The objective of these visits is to gather information about each Participant's risk framework, compliance systems, processes and culture by interviewing key staff.
RADARs ordinarily take place at the Participant's primary business office and last approximately two hours. [Dates and times for these visits are agreed in advance to minimise potential disruption to the Participant's business]. During the RADAR, the Relationship Manager asks representatives from the Participant (usually senior compliance staff and various of heads of business) a series of questions about their:
- organisational structure
- directors and employees
- clients, products and services
- corporate advisory work
- participation on multiple exchanges
- authorised representatives
- compliance and risk frameworks
- corporate governance
- policies and procedures
- staff trading
- settlement & clearing
- technology, and
- client money handling and capital adequacy.
After completing the RADAR, the Relationship Manager may send the Participant a letter containing their observations and recommendations, which may include suggestions for improving compliance practices where concerns have been identified. This can lead to improvements in Participants’ compliance frameworks and an increased awareness of their compliance obligations.
Compliance Liaison visits are conducted with each Participant approximately once per calendar year. The information gathered during these visits informs ASIC's risk based approach to markets regulation.
Like RADARs, these visits ordinarily take place at the Participant's business, although they are shorter. During the visit, the Relationship Manager asks the Participant questions about their business and the industry, with a particular focus on any risks and trends the Participant has observed and developments they are anticipating. The Relationship Manager may also canvass the Participant's views on various 'issues of the day' involving financial markets.
Both RADARs and Compliance Liaison visits also provide an opportunity for the Relationship Manager to update Participants about areas of focus for ASIC in market supervision and surveillance. ASIC may use the information gathered during RADARs and Compliance Liaison visits to identify issues or behaviours which warrant monitoring or surveillance. These may be specific to an individual firm or more general in nature.
The reciprocal nature of the relationship between Relationship Managers and Participants assists ASIC to identify, monitor and respond to key risks and trends in Australia's financial markets. We are grateful for the level of co-operation and assistance we receive from Participants in conducting these meetings.