In his recent opening address to the Senate Economics Legislation Committee, Australian Securities and Investments Commission (ASIC) Chair James Shipton flagged that the regulator intends to adopt a new 'more intrusive, enduring, and with onsite visits, more physical' approach to supervision.   A brief overview of the key points of his address is below.

Key Points

• Observations of Australia's financial system: Mr Shipton reiterated observations he's made previously in recent speeches (see note below) regarding Australia's financial system, and its regulatory structure.  More particularly he said there is a 'trust deficit between the financial industry and the broader community; insufficient imbedding of a professional mindset and culture in finance, and insufficient attention, and mitigation, by the finance industry of conflicts of interests'.  He commented that these observations are 'very consistent' the reports and recommendations of ASIC in recent times.

• New approach enforcement:  Noting that many of the issues explored at the Financial Services Royal Commission were 'based on the work' of ASIC's Wealth Management Project — a project focused on the financial advice sector — Mr Shipton reiterated (see note below) that ASIC intends to 'expand and accelerate' the project.  Mr Shipton said that this could include making greater use of external resources for ASIC investigations in order to accelerate response times.  He also added that the government has agreed in principle to the recommendations of the Taskforce that reviewed ASIC's enforcement powers and outlined the changes in question.

[Note: In his keynote address to the Australian Council of Superannuation Investors (ACSI) annual forum, Mr James Shipton called on industry to act to address the 'trust deficit' in the financial sector.  He also flagged that ASIC will 'accelerate and expand' the Wealth Management Project and apply a new supervisory focus to the largest financial institutions and superannuation funds.  See: Governance News 18/05/2018. The theme of trust and Mr Shipton's observations of the financial sector were also explored in his inaugural keynote address to the ASIC Annual forum.  See: Governance News 23/03/2018.]

New supervisory approach: Mr Shipton said that ASIC currently supervises firms it regulates through a combination of risk-based surveillance and/or reviews aimed at particular firms and thematic review aimed at sectors or subsectors.  He said that though effective, and though these approaches would continue to play a role, ASIC intends to adopt new supervisory approaches for 'Australia's largest financial institutions and important sectors'.  Mr Shipton said that 'This will involve more intensive, day-to-day supervision, with better co-operation between our fellow regulators, especially with APRA.  This approach will be more intrusive, enduring and, with onsite visits, more physical'.

• Adoption of regtech solutions: The third new approach, highlighted by Mr Shipton, was ASIC's role in encouraging adoption of regulatory technology solutions in the financial sector. 'ASIC believes Australia can position itself as a world leader in the development, and adoption, of regtech solutions, and we will look at new ways to encourage this' he said.

• Further initiatives necessary going forward: Mr Shipton noted that further initiatives to enhance ASIC's approach are to be expected in future and that he looks forward to the recommendations of the Financial Services Royal Commission. 

• Additional funding? Mr Shipton confirmed that he has submitted a request for funding of these initiatives to the government for consideration and that though he could not pre-empt the formal approval process, the Minister for Financial Services and the Treasurer had received the initiatives in a positive light.  Mr Shipton added that 'ASIC looks to maximise the effectiveness of our work within our budget.  Deciding what we do and don't do is one of the most difficult parts of ASIC's job.  My job is to ensure that ASIC responds to circumstances strategically and with a clear sense of priority'.

[Sources: Opening statement by James Shipton, Chair, Australian Securities and Investments Commission, Senate Economics Legislation Committee 30/05/2018]