Financial services industry: alert, but not alarmed

The financial services industry needs to be alert to the fact that the Government is tightening regulatory control of the industry and its markets — not in a legislative rush, but via an incremental expansion of existing jurisdiction.

In the space of just three months, the Commonwealth has twice chosen to use regulatory expansion to impose change, the most recent being its decision to give the Australian Securities and Investments Commission (ASIC) supervision of financial markets, including the Australian Securities Exchange (ASX).

Previously, the Government chose to use regulatory change to impose its new intra-fund advice regime — a move that precluded any substantial parliamentary debate.

There is, of course, nothing wrong with the Government moving to give the regulator closer supervision of financial markets. Indeed, the move is hardly surprising in circumstances where many observers believe the role of the ASX to have been conflicted by its status as both supervisor and participant.

But the question many might ask is whether ASIC really needed any additional powers with respect to the ASX or any other financial markets.

And on the face of it, nothing will have changed in terms of day-to-day supervision of listed companies. Explaining the move, the Minister for Financial Services and Corporate Law, Chris Bowen, said individual markets such as the ASX would retain supervision of listed entities.

He argued that a whole-of-market supervisor would effectively consolidate current individual supervisory responsibilities into one entity, streamlining supervision and enforcement.

The minister might have added that the Federal Government was also concerned about being seen to be doing the right thing in the context of public opinion, the global financial crisis and a number of recent corporate collapses.

There is no cause for anyone in the financial services industry to take great exception to the Government giving ASIC yet more supervisory power, but it would be wrong to view the latest move in isolation.

If the financial services industry is wise, it will remain alert to what may emerge as a pattern of regulatory extension by stealth.

— Mike Taylor