The Government’s new compliance regime, explained

Alex Burke,  Senior Writer,  No More Practice Education

Last week, we covered the steps you'd need to take in order to prepare for ASIC's industry funding regime - but Treasury has made some additional changes to the regulator's mandate which will have further impacts on advice industry monitoring and conduct enforcement.

Then-Minister for Revenue and Financial Services Kelly O'Dwyer explained that ASIC was being given $70.1 million in funding to boost its "enforcement capabilities and enable it to undertake new regulatory activities and investigations, so as to better deliver on its mandate of combating misconduct in corporations and in the financial services industry."

What does this entail?

On-site supervision

You have heard that part of this new funding package - $8 million, to be exact - will be committed to establishing a supervisory model for Australia's largest financial institutions whereby dedicated ASIC staff will be embedded in these institutions to monitor compliance activities. It's aimed at taking a proactive approach to compliance, following on from some of the recommendations made during the Royal Commission.

Commenting on this development, Australian Bankers Association chief executive Anna Bligh said that “banks will work proactively and in good faith with ASIC on the measures announced today to improve monitoring of regulation and increase the transparency of the financial services industry.”

“While the industry awaits further details of how the new initiatives will operate, it is committed to ensuring it is quickly and efficiently implemented,” she added.

On top of this, another $6.8 million go towards creating a "taskforce" which will review governance and police misconduct within other large listed entities, including advice firms. This taskforce will be able to deploy ASIC staff on-site to conduct investigations.

Whistleblowers and litigation

O'Dwyer said $26.2 million will be deployed into ASIC's Enforcement Special Account. This will, she explained, "increase the intensity of ASIC's enforcement activities" by providing further funds to pursue action against "well-funded litigants" in instances of serious misconduct.

Another $6.6 million will go towards implementing reforms to whistleblower protection laws, giving ASIC further resources to "receive, assess, triage and assess whistleblower disclosures about misconduct."

Super and advice

Alongside the Royal Commission's hearings into the superannuation sector, O'Dwyer explained $9.4 million would go towards boosting supervision "by strengthening audit and enforcement action to improve transparency and outcomes for superannuation members."

Finally, some remaining monies will be used to improving access to the Financial Advisers Register and "ensuring compliance by licensees and financial advisers" with respect to the FoFA regime.

What does this all mean?

Coming alongside the significant changes to fees and disclosure as per the RG97 regime - not to mention the proposed establishment of “target market determinations” for investment products - it’s clear that the Government (despite the recent reshuffle) is looking to improve ASIC’s standing as an effective conduct regulator.

There also appears to be a focus on improving how ASIC’s activities affect and are relevant to consumers, suggesting a possibly greater interest focus on and interest in compliance from your clients.


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