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FRAA says ASIC 'generally effective' but highlights need for 'cultural shift'

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The watchdog tasked with overseeing the corporate regulator has delivered its first report.

The Financial Regulator Assessment Authority (FRAA) on Thursday delivered the findings of its inaugural review of ASIC and made four recommendations, which are expected to improve the effectiveness and capability of the corporate regulator.

The watchdog’s first review was a targeted assessment of ASIC’s effectiveness and capability in strategic prioritisation, planning and decision making, ASIC’s surveillance function, and ASIC’s licensing function. It also examined the regulator’s use of data and technology in each of these areas of focus.

The report, titled Effectiveness and Capability Review of the Australian Securities and Investments Commission (ASIC), acknowledged that while ASIC is “generally effective and capable in the areas reviewed”, “there are important opportunities to enhance its performance”.

The four recommendations made include:

  • ASIC requires a substantial uplift in its data and technology capability, which will involve cultural change.
  • ASIC should have a stronger focus across the organisation on enhancing the quality of its engagement with stakeholders.
  • ASIC should enhance its ability to measure its own effectiveness and capability, and communicate the outcomes of such assessment transparently, both internally and externally.
  • ASIC should continue to broaden its mix of skill sets to ensure it can meet the current and future needs of the organisation.

“The FRAA expects that the implementation of these recommendations will require a cultural shift in the way that ASIC approaches its work and engages with its regulated population and broader stakeholders,” the report said.

“Such a cultural shift should increase the confidence of government, and indeed all stakeholders, in ASIC’s effectiveness and capability”.

ASIC welcomes report

In welcoming the report, ASIC chair Joe Longo said: “We need to keep pace in an environment of accelerated change in order to be a confident and ambitious regulator”.

“I welcome the FRAA’s recommendations which align closely with my priorities for ASIC.”

The corporate regulator identified several key initiatives currently underway that align with the FRAA’s recommendations, highlighting its “multi-year data and digital strategies” that focus on uplifting its technology systems, including its licencing system.

The corporate regulator also flagged its “people strategy”, which includes building “a future-fit workforce that is equipped with a broad skill set”.

Also underway are “regulatory efficiency initiatives” that are expected to make changes to the way ASIC administers the law.

“We will continue to implement the FRAA’s findings in our future work,” the chair said.

“We will always be committed to ongoing improvement of our effectiveness and capability to become an even stronger regulator, trusted by the community and always looking ahead,” he added.

The FRAA was established in response to recommendations 6.13 and 6.14 of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, and is tasked with reviewing and reporting on the effectiveness and capability of ASIC and APRA. 

The then treasurer Josh Frydenberg announced the creation of the FRAA in April last year.

“In establishing the FRAA, the Morrison government is ensuring that Australia’s financial regulators will continue to be strong and effective, maintaining the community’s trust and confidence in the financial system,” Mr Frydenberg said at the time.

It was earlier confirmed that the FRAA would not have the power to make a comment on individual enforcement actions taken by the regulators “so that operational independence is not unreasonably impacted”, nor will it be able to direct regulators to implement any of the recommendations made.