The chairman of the Australian Securities and Investments Commission (ASIC), Greg Medcraft, has signalled his desire for the regulator to adopt a more proactive stance, effectively eschewing the approach of one of his predecessors, Tony D'Aloisio, who likened ASIC to the policeman who cleaned up after an accident.
In a speech to the American Chamber of Commerce in Australia, Medcraft said that following the global financial crisis, the environment for regulation had changed dramatically.
"Regulators need to be on the front foot," he said. "Rather than being reactive and arriving at the scene of the accident, regulators need to be cops on the beat, helping to prevent and deter accidents."
However, Medcraft said this represented a major challenge for ASIC, "particularly with our limited resources".
"ASIC must spend a certain amount of resources on its core responsibilities: registration and licensing, and reactive regulation – ie, investigating breaches and potential misconduct, and fulfilling our statutory mandate such as registration and licensing.
"The remainder of ASIC's resources can then be used for proactive regulation," Medcraft said.
He said proactive regulation involved engagement with stakeholders, surveillance (desk-based and onsite), investor education and regulatory guidance.
"These actions build resilience in the financial system as each participant in the system (investor, product-manufacturer, distributer etc) meets a higher standard of conduct and understanding," Medcraft said. "The system then becomes more resilient to shocks, and when a market failure does occur, hopefully less money is lost."
