Effectiveness of ASIC in Regulating the Market

Discussion Leader's Argument:

Disclaimer

ASIC is facing serious challenges including regulating all consumer lending products and taking over the ASX's role in market supervision. This poses questions about its ability to hire the appropriate skills to effectively regulate the Australian market.

Is ASIC regarded as an effective regulator and will this change? What will the changes mean for market participants?

Relevant Articles:

Client Page Member Comments

Senior Investment Analyst (Investment Banking Client Page Member)
There are many issues here, not the least of which involves the ASX and consumer lending. Managed investments of a wide variety of types also need to be taken into account, where ASIC’s performance has been....patchy. My personal experiences in dealing with ASIC on industry issues highlights the problems faced by an organisation of this type. While not casting dispersion on their staff, let’s be blunt. The talent goes where the money is. It’s the same in any industry (my own included). It seems to me given their pay scales and resources that it’s hard for ASIC to get the talent it needs. Result, you have one hand tied behind your back before you start. Are they regarded as an effective regulator, the feedback I get from the general public currently is no. Of course many of the problems the mum and dad investors have been caught in are of their own making, but they shout the loudest. Also, the general public usually don’t understand the limitations ASIC faces in many areas. Hopefully with the new roles it is undertaking, this will start to change.
Senior Investment Analyst (Investment Banking Client Page Member)
Might be getting a bit off topic, but the latest embarrassment for ASIC is that they recently called for submissions on new proposed benchmarks for Agribusiness Managed Investment Schemes to improve disclosure for investors getting into them. One of the scheme managers went ahead and used these benchmarks in their PDS and then promptly went into administration 17 days later. So much for improving the decision making for investors.
Equities Analyst (Investment Banking Client Page Member)
Assuming the supervisory role across issuers and participants currently undertaken by the ASX is a big task and it is very important that the transition of these responsibilities is well managed to maintain market confidence and stability. It will be hard for the regulator to attract talent to do a good supervisory job- particularly on the supervision of participants due to 1) pay scales will not attract skilled market participants 2) perversely contrary to perception the phenomenon of regulatory capture is more likely to occur now that supervision will not being done by public company with ASIC agency oversight. 3)Good people in reg. roles will need the added stimulation of policy formulation hence I think that there is risk around execution and implementation.
Equity Research (Institutional Client Page Member)
The reality is that markets professionals will not go work there - why take a huge pay cut? sure, it may be a good bear market put option, but they will always lose good people as markets recover and someone bids the staff 3x base. ASIC needs to pay up to hire and retain good people - this isn\'t rocket science, just a market reality.
Executive Director (Investment Banking Client Page Member)
ASIC does not have the appropriate skills to handle market regulation. It needs an injection of industry experts, which will cost large sums of money as most market participants will not be willing to join the regulator for small change. If you do not understand your market, you can not regulate it, nor supervise it satisfactorily. The changes to regulations come as a kneejerk reaction to the failure of current regulations and move the way of being overly favorable to the consumer. Whilst it is correct to split the ASX role in market conductor and regulator, it is important that the role is done properly.
Executive (Investment Banking Client Page Member)
My experience is that, like most organisations, the capability of ASIC staff varies considerably and that it is also a very subjective undertaking attempting to judge its performance. On this issue of performance I am more concerned with what drives ASIC’s agenda rather than the capability of its staff. The ASIC drivers/motivators are likely to be different to what motivates the regulatory undertaking at the ASX, which could have an impact on market participants. ASIC has a need to justify its role and to manage perceptions of itself. This combined with the expectation that over time it will improve market supervision (rel to what the ASX was achieving) could lead to a more aggressive approach. It could lead to additional rules and regulations and or ASIC seeking oversight of the ASX’s remaining regulatory activities.
Analyst (Investment Banking Client Page Member)
ASIC is really only performing regulatory tasks as an agent of the goverenment. So if their role is flawed or their performance poor, the government is ultimately accountable. But are they?
Analyst (Investment Banking Client Page Member)
How much has ASIC\'s expenditure gone up in the past few years under their new Chairman? And how much more effective have they become?
Executive Director (Institutional Client Page Member)
The recent changes make a lot of sense. Although, if the government is serious about boosting regulation, it should show this by raising the funding it gives to ASIC.
Principal (Institutional Client Page Member)
ASIC has long been dubbed the \"corporate puppy dog\" in the press. But over the last year they have developed a reputation for being incompetant as well. Three high profile court cases, and three losses as well. Now news this morning that ASIC held up the class action against bank fees for 3 months. Im unsure what is wrong within ASIC. But something is very wrong. I could guess its full of lawyers without a professional investor in sight. Some times \"to catch a thief, you must use a thief\". The US SEC uses legislation originally designed to roll up the mafia in order to discover those who are manipulating markets. I doubt ASIC has even thought about such methods let alone recommended them to the politicians. Finally I\'d guess that ASIC salary packages are not commensurate with those found else where in teh industry. If you \"pay peanuts, you get monkeys\"
Director (Institutional Client Page Member)
My experience with ASIC and in looking at their track record is that they have problems understanding the circumstances and forces that are building for the next consumer crises in fin. services. Lots of lawyers but little market wisdom.

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