Speaking at the Thomson Reuters Australia Regulatory Summit in Sydney, ASIC chairman James Shipton pointed to the role that “the regulated population, people and firms” played in the financial system’s smooth operations.
“Our regulatory system was not designed as a police state, and this was deliberate.
“Instead, our system was designed on the premise that participants should do their part to ensure the system operates appropriately,” Mr Shipton said.
He pointed out that one of the reasons the finance sector was so heavily regulated was due to the failure of financial institutions to pull their weight.
“The regulatory system in finance, globally, has not been performing 'at capacity' for quite some time.
“And what I mean by this is that the financial participants themselves have not played their part,” Mr Shipton said.
“There have been repeated instances of industry failures that have led to crises that have not been remediated by the industry leaving additional regulation as the only response.
“Sure, financial regulators need to step up, but I genuinely think there are numerous examples of the industry 'vacating the field' meaning the regulators were the only ones left to act.”
He argued that ASIC’s role was much more than an enforcer of law – but that this did not mean it would be “reticent about using [its] enforcement tools”.
“What I am saying is that when we discuss our regulatory system we need to broaden this discourse beyond just the deployment of enforcement tools,” he said.
As a regulator, ASIC was “in the ‘business of modifying behaviours’”, that is, the “identification of and management of harms”.
ASIC would also have to ensure market participants were meeting community expectations, Mr Shipton added.
“We must also recognise that the regulatory system is not just supported by formal rules, but also by norms, industry practices and, of equal importance, community expectations.
“And this is why everyone in finance needs should not just ask if something is legally permissible, but also whether it is the right thing to do,” he said.
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