This article was written by Jasmine Forde and Georgia Sullivan
On 26 August 2021, the Australian Securities and Investments Commission (ASIC) released its:
- Corporate Plan 2021-25 (ASIC Corporate Plan); and
- Statement of Intent, released in response to the Australian Government's Statement of Expectations 2021 (Statement of Expectations), which was also made publicly available on 26 August 2021.
Each of these publications confirm a widely predicted change in ASIC's strategic direction away from the hard-line enforcement approach which emerged following the Financial Services Royal Commission. Announcements from Treasury and other government entities throughout 2021 signalled that, in light of the challenging financial circumstances of the continuing COVID-19 pandemic, 'the Federal Government expects ASIC to support Australia's economic recovery'. The ASIC Corporate Plan and Statement of Expectations reflect a pivot to largely transparent and reduced regulation to allow business to operate with more flexibility.
Treasury has also stated its expectation that the Australian Prudential Regulation Authority (APRA) will actively support COVID-19 response activities and economic recovery. APRA's newly released 2021-25 Corporate Plan (APRA Corporate Plan) addresses current COVID-19 concerns but also emphasises the necessity of 'preparing for tomorrow' by fostering forward-looking prudential architecture and cyber resilience.
ASIC Statement of Expectations
The Statement of Expectations, as expected, varies significantly from the previous statement, released in April 2018 following the Financial Services Royal Commission. Rather than enforcement action, ASIC has clearly been directed to support Australia's economic recovery from the COVID-19 pandemic by working more cooperatively with regulated entities, including by minimising regulatory burden and cost, providing appropriate guidance, facilitating discretion and flexibility, and transparently engaging with entities when making decisions.
The Federal Government also expects ASIC to promote a digital economy and create efficiencies by utilising technology and coordinating regulatory activities with other agencies.
ASIC Statement of Intent
ASIC's Statement of Intent, released in response to the Statement of Expectations, outlines how a new look ASIC lead by Joe Longo and Sarah Court intends to discharge its responsibilities. ASIC's immediate focus will be on finalising remaining issues, litigation and referrals from the Financial Services Royal Commission, and implementing new legislative reforms over the next 6-12 months. After this, ASIC will be 'moving into a new era'.
This new era will be focused on:
- minimising the cost of regulatory burdens including through innovation and use of data and digital technology;
- enhancing cooperation and information sharing with APRA and other regulators;
- assisting businesses to comply with the law flexibly with clear guidance and minimum compliance cost; and
- use of ASIC's full suite of regulatory tools, with targeted enforcement action to be focused on areas of greatest harm and exercise of relief powers.
ASIC Corporate Plan
The ASIC Corporate Plan is consistent with the Statement of Intent, and outlines ASIC's strategic regulatory priorities and proposed actions over the next four years. As well as internal operational capacity building (which will likely be the subject of extensive independent review by the newly established Financial Regulator Assessment Authority), ASIC's Corporate Plan targets four external priorities comprising:
- the promotion of economic recovery through innovation, efficient regulation and targeted enforcement action;
- reduction of risks to consumers exposed to poor products and increased investment scams;
- support in mitigating cyber security risks for ASIC's regulated population; and
- assisting industry readiness and compliance with law reform initiatives, including the Financial Accountability Regime, design and distribution obligations, superannuation and insurance reforms and breach reporting.
The ASIC Corporate Plan identifies the following areas which will be the target of enforcement action:
- serious misconduct that harms confidence in markets;
- poor product design and governance, mis-selling and failure to comply with conflict of interest requirements, and breach and disclosure obligations;
- perpetrators of egregious digital and other financial sector scams;
- failure to adequately manage cyber risks that harm consumers; and
- failure to complement new standards set by law reform initiatives.
APRA Corporate Plan
The APRA Corporate Plan is focused on the theme of "protected today, prepared for tomorrow", to ensure regulated entities are equipped to deal with "existing, emerging and future trends and risks". The APRA Corporate Plan actively acknowledges that while the COVID-19 pandemic is continuing and financial system stability remains a key priority, there are other key challenges on the horizon APRA intends to address, including:
- superannuation retirement income products;
- insurance accessibility and affordability;
- climate change related financial risks; and
- the impact of new financial activities and participants, including preparation for potential structural shifts in the market.