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Investment banks, issuers, brokers, lenders, financial
market participants, responsible entities, company directors,
auditors and insolvency practitioners are all in ASIC's sights
for increased regulatory scrutiny over the next four years. These
focus areas were unveiled yesterday in ASIC's
Corporate Plan, with ASIC also detailing the extensive market
surveillance it will undertake to ensure compliance with the
law.
ASIC's priorities for the next four years are comprehensive.
In short, ASIC is furthering its consumer protection mandate by
responding to poor gatekeeper culture and conduct through
appropriate regulatory measures. Where ASIC's surveillance
measures identify wrongdoing, ASIC will take enforcement action or
accept enforceable undertakings. All entities are on notice of
ASIC's surveillance areas and should review their compliance
with the target areas ASIC has identified. If any deficiencies are
discovered it is crucial that immediate action is taken to rectify
those deficiencies. We have summarised ASIC's focus areas
below.
Entity
What is ASIC's focus?
Investment banks, issuers, brokers and other service
providers
Reviewing market practices on confidential information and
acting to improve standards and behaviour in handling confidential
information.
Proactively investigating benchmark manipulation and the
practices of investment banks.
"Conduct risk" is the risk of inappropriate or
unlawful behaviour by staff.
Examining M&A and fundraising activities which may be high
conduct risk activities, in particular transactions involving
backdoor listings, substantial overseas assets or high levels of
intangible assets.
Investigating breach reports and reports of misconduct.
Targeting market operators and participants to identify weak
compliance systems.
Lenders and finance brokers
Monitoring lenders' compliance (including finance brokers
and margin lenders) with responsible lending and general conduct
obligations. A particular focus will be interest only
loans.
Assessing and reducing the sale of inappropriate lending
products, including compliance with recently introduced interest
rate caps and consumer leases.
Responsible entities
Considering the adequacy of policies dealing with incentives,
conflicts of interest, whistleblowing, complaints handling,
remediation, recruitment and training.
Reviewing risk management arrangements in the managed funds
sector, including conflict management, liquidity and leverage.
Reviewing risk-profiled responsible entities with a focus on
opaque and complex structures, liquidity, mandate compliance and
custody arrangements.
Identifying inappropriate conduct by assessing breach reports
and reports of misconduct and incorporating culture and incentives
more explicitly into risk-based surveillance reviews.
Assessing limitations on financial services licensing for
responsible managers and responsible officers, especially in the
context of the 'licensees-for-hire' business model.
Monitoring innovations and new financial products and
services.
Directors, auditors and insolvency practitioners
Reviewing corporate transaction and fundraising documents lodged
with ASIC to improve the quality of information provided to
investors and the market.
Reviewing the adequacy of financial reports of listed and other
public interest entities.
Examining audit firm business models to ensure appropriate
experience and expertise is applied to increasingly complex clients
and businesses, financial reporting judgments and audit
approaches.
Investigating high-risk insolvency practitioners (including
pre-insolvency advisers), focussing on independence, competence,
improper gain and remuneration.
Reviewing systemic non-compliance by insolvency practitioners
with statutory lodgement obligations.
We will continue to monitor any regulatory developments and
provide further updates throughout the year. If you have any
concerns as to how your business may be impacted by these
regulatory priorities for ASIC, please contact a member of our
team.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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