A panel at the 2023 Stockbrokers and Investment Adviser Association (SIAA) conference has questioned if the Australian Securities and Investments Commission (ASIC) could occasionally toe the line of overreach.
According to Michael Mathieson, senior regulatory counsel at Allens Lawyers, the expectations in ASIC’s guidance around design and distribution obligations (DDOs) go “well beyond” the legal requirements.
“On one hand, I feel a bit for ASIC because industry says ‘give us guidance’ and when they get guidance, it’s like ‘oh, we don’t want those bits’. But with DDO [and] the regulatory guide, what it says about target market determination, the expectations in the guidance go well beyond the legal requirements,” Mathieson said.
To date, the corporate regulator had issued around 36 stop orders since DDO was introduced in late 2021. This included stop orders in March on three BT funds for DDO failings; two Perpetual funds in November 2022; and three crypto funds from Holon Investments in October 2022.
“ASIC has been very active in especially the stop orders on target market determinants (TMDs). In this, my view is that a lot of that action has been based on non-compliance with the guidance as opposed to non-compliance with the law and so I do think that phenomenon [of overreach] does exist,” he explained.
“Does it lead to significant harm? Well, between copping a press release and the indignity of having ASIC revisiting your TMD, it’s not the biggest penalty, it’s not the end of the world. I think the phenomenon exists, but I’m not sure that it’s the big evil some might think.”
Fellow panellist Maria Lykouras, JBWere executive, agreed that regulatory guides remained important, adding that organisations should continue to look at the legislation independently to figure out where they stood.
“You’ve got new legislation, there’s no case law, you don’t know how it’s going to be applied or how you should apply it, so getting a view from the regulator that takes into account industry feedback, which is the normal process to help you understand and interpret the law, is really helpful,” she said.
In the event that firms disagreed with ASIC’s interpretation, she said they were within their rights to seek additional feedback and go in a different direction depending on the legal advice received.
“Then you could have a breach where the regulator will seek to apply their interpretations and you don’t agree because you’ve looked at the law and you believe you’re right — that’s why you see the court cases we have,” Lykouras said.
“I do think it’s important to have regulatory guides that support us, but as an organisation, we also have to look at the legislation and take some of our positions on what we think is right for us.”
ASIC senior executive leader for markets supervision, Calissa Aldridge, said that ASIC’s regulatory guides were intended to ensure transparency as a corporate regulator.
“The objective in having regulatory guides is very much to share our interpretation of the law and to be [transparent] in when and how we might use the powers we have,” she said.
“There has been feedback sometimes that we provide the examples of the obvious [cases] rather than the tricky questions. I think that goes to the point of — when are you straying into scenarios that might not always be within the law? That’s a tricky balance that we’re always trying to manage and respond to industry.
“We’ve got a principles-based regime, generally speaking [and] sometimes industry needs some guidance to think about how we might apply certain aspects of being honest and fair in the context of something very complex.”
