The Australian Securities and Investments Commission (ASIC) has been too busy playing with the red tape of licence applications to perform its surveillance and enforcement activities, a damning report of the regulator’s performance has found.
ASIC spent almost double the resources it was allocated to spend on licensing, but issued only 3,738 financial services licences, less than half its forecast number of up to 8,000.
To fund the budget blow out, the report from the Australian National Audit Office found ASIC cut corners on analysts’ scrutiny of applications to reduce processing time, and cut back on non-licensing activities such as surveillance of licensees.
The report found this resulted in ASIC’s licence systems failing to properly record critical elements of its licence decisions, such as assessments of the applicant’s character and evidence the applicant could meet their licence obligations.
ASIC has blamed its reallocation of resources on licence applicants waiting until the last minute to submit their applications, with two thirds of licences granted in the two year transition period to March 10, 2004, being issued in the last six months, and on “the generally poor quality of the majority of the licence applications”.
Additional workload in licensing application also contributed to ASIC’s failure to reach its surveillance targets, the watchdog argued.
ASIC conducted 1,596 surveillances, only 54 per cent of its target number over the three years from mid-2002 to June 2005.
The regulator also attributed its failure to reach these targets to lower than expected numbers of licences granted, which it said reduced the population of subjects for surveillance.
The report by Auditor-General Ian McPhee recommended ASIC review its targeted or campaign actions, as 65 per cent of these activities resulted in no further action, only 7 per cent resulted in the consideration of enforcement actions, and 14 per cent achieved a rectification of the licensee’s procedures.
Other ASIC activities also cost more than expected. The processing of relief applications consumed four times the resources initially anticipated, while ASIC “significantly overestimated the number of relief applications, it also significantly underestimated the complexity of the applications for relief that were sought”.
