FRAA releases 2022 review of ASIC

On 25 August 2022, the Financial Regulator Assessment Authority tabled its Effectiveness and Capability Review of the Australian Securities Investments Commission (FRAA Report).

In this alert, we consider the key findings and takeaways from the FRAA Report.

This was the first review undertaken by the FRAA since it was established by the previous Federal Government following a recommendation by the Hayne Royal Commission.

Key findings

The FRAA considered ASIC’s strategic priorities, planning and decision-making, surveillance and licensing. Its findings were informed by public consultations, surveys of ASIC staff and discussions with a number of stakeholders including industry and consumer advocacy bodies, peer regulators and academics.

The FRAA delivered a generally positive assessment of ASIC’s effectiveness and capability as a key regulator with broad oversight of financial services, corporate regulation, consumer credits, financial education, supervision of financial markets, insolvency and company registration.

However, the FRAA also identified key growth opportunities for ASIC to improve. Specifically, it recommended that ASIC:

• expand its use of technology, data and analytics to better understand and manage risks and emerging threats;
• undertake transparent and open dialogues with their stakeholders to improve the quality and consistency of ASIC’s engagement with stakeholders;
• develop effective mechanisms to better measure, self-assess and communicate its effectiveness and capability both internally and externally; and
• extend the diversity of its workforce to meet its current and future needs as a regulator.

The FRAA acknowledged on multiple occasions throughout its report that giving effect to these recommendations will require cultural change at ASIC. Specifically, it was noted that improving data and technology capability would require “a substantial uplift”, ^[1] enhanced stakeholder engagement would require “a cultural shift… in the way that ASIC thinks about and engages with its regulated population and broader stakeholders” ^[2] and that there needed to be a “culture of continuous improvement” ^[3] fostered at ASIC.

If these recommendations are actioned effectively, the FRAA believes that it will better position ASIC to engage meaningfully with stakeholders, better communicate its activity and continue to improve. The FRAA report advocates strongly for these changes to ensure ASIC can best adapt to emerging threats and trends, and ultimately, maximise its effectiveness and capability as a key regulator of Australia’s financial ecosystem.

Where to from here?

Overall, the FRAA Report paves a welcome path forward to improve governance and accountability within ASIC.

The FRAA has signalled that besides reviewing ASIC’s progress on the recommendations from its inaugural review, the next review of ASIC will take place in 2023-24 and focus on different areas of its functions as well as how changes in ASIC’s governance and accountability framework are operating in practice. The FRAA will also review ASIC’s progress on the recommendations outlined.

In response to the FRAA report, Joe Longo, ASIC’s Chair, welcomed the FRAA’s recommendations and acknowledged the “need to keep pace in an environment of accelerated change in order to be a confident and ambitious regulator.” ^[4] He pledged that ASIC would “continue to implement the FRAA’s findings in our future work [and committed to] ongoing improvement for our effectiveness and capability to become an even stronger regulator, trusted by the community and always looking ahead.” ^[5]

The review strikes a good balance, acknowledging the issues raised by stakeholders while also acknowledging the positive manner in which ASIC is responding to these challenges under (relatively) new Chair Joe Longo, and providing constructive recommendations for ASIC.

If you would like to discuss this report further, please get in touch with the authors or your King & Wood Mallesons contact.