Speaking at a lunch at AmCham in Sydney on Thursday, Longo said the research – commissioned by ASIC and conducted by an unnamed party – will underpin further industry consultation and forms part of the regulator’s broader capital markets review. It follows ASIC’s February consultation paper, which drew more than 90 submissions from industry participants.
Longo said, having read some of the feedback received by the regulator, there was “moral certainty” that private credit – along with broader private markets – requires greater data and transparency.
“There is one issue I can tell you with moral certainty, it is data and transparency … We’re spending a lot of time in all sorts of ways to try and get data through the Reserve Bank, APRA, market participants, entities like Preqin. Part of the whole thing is to shine a light on what is going on in these private markets,” Longo said.
He described the regulator’s current work as evolving, noting that while ASIC has “some models, some ideas”, the final framework is yet to be shaped.
“I have no intention in making Australia a more difficult place to invest or to create more regulatory complexities than we already have,” Longo said.
“I do feel strongly that there probably needs to be some adjustment to our regulatory settings around data and transparency … Haven’t quite figured out what that looks like yet, but I think it will be in everybody’s interest that the regulator gets the right data as efficiently as possible, in a standardised way and in a way that is of benefit to market participants.”
In addition to regulatory tweaks on transparency, ASIC is looking to develop best practice guidelines, taking cues from the US and Europe, and is leaning towards an industry-led model whereby industry leaders and organisations will set the standards and ensure they are followed.
“Whether that means more regulation or law reform, I don’t know if that’s where we’ll land. I think we’re more likely to land in saying, ‘Look, if you’re doing a private credit transaction of this nature, this is what we expect to see, this is what we see as best practice’,” Longo said.
“The hope is that ... the market itself develops the standards, much better than the regulator would. If they don’t get it right, we’ll take action.”
ASIC has already begun targeted surveillance of selected private credit funds and entities to complement its research, including a review of valuation methodologies and fee structures used in the sector.
“We expect to have a lot more to say about what is happening in private credit as the year unfolds,” he said.
“Everyone sees an upside in making sure we have good standards around disclosure and valuations, for example, conflict of interest,” Longo added. “More transparency means more confidence.”
ASIC’s private markets work, he confirmed on Thursday, is only expected to ramp up over the next six to 12 months.
“I’m optimistic we’ll get to the right answer,” he said.
On public markets, Longo rejected the suggestion that Australia’s regulatory regime is driving the decline in new listings.
“Although there clearly are high expectations of directors of public companies, we do not think that the regulatory burden is a reason why we’re seeing declining listings,” he said.
“That doesn’t mean we can sit on our laurels,” he added, pointing to ASIC’s announcement earlier this week and noting the regulator is considering “two to three” additional internal ideas, with further details to be released later this year.
