The Financial Services Council (FSC) has strongly warned against greater regulatory power being given to the Australian Securities and Investments Commission (ASIC).
In a response to the Australian Law Reform Commission’s (ALRC) interim report B into financial services legislation, the FSC said it had already seen a “blurring of the lines” between ASIC’s roles as regulator and law-maker.
This led to concerns that any extra law-making powers delegated to ASIC would be difficult to monitor and review.
“While it is both a regulator (law enforcer) and law-maker, its law-making role is theoretically confined to making technical rules, or dealing with matters of detail and instruments that should not involve matters of ‘policy’. However, in practice this line has sometimes blurred.
“Under the ALRC proposed new legislative hierarchy, given the seemingly greater scope of law-making power to be held by ASIC, it will be even more important to establish clear boundaries and guardrails to ensure that any actions taken by ASIC are appropriately monitored and reviewed to ensure that matters of policy are dealt with by Parliament. Even if they are put in place, the FSC has concerns that in practice these boundaries and guardrails will not be effectively enforced.”
The FSC acknowledged the regulatory system in the UK had a similar model with its Financial Conduct Authority but that this was different to the constitutional model in Australia where ASIC’s role was to enforce and administer the law.
Regarding criminal offences including those that lead to imprisonment and significant civil penalties, and administrative penalties, the FSC said these should remain the domain of primary legislation rather than delegated to ASIC.
“To the extent these matters are delegated, it would be preferable to have limited power delegated to the Minister (rather that ASIC). Any potential role for ASIC in dictating public law sanctions in the form of penalties (offences, civil penalties and infringement notices), even if they are considered minor, should be treated with great caution and consulted on widely before it is taken further.”
Instead, the FSC recommended a separate body was set up to make and maintain delegated legislation which would comprise delegates from Treasury and ASIC plus an independent chair and allow ASIC to have input without sole power.
