ASIC gets EU pass mark, with caveats
The Australian Securities and Investments Commission (ASIC) has welcomed a Commonwealth Auditor-General's report which it believes has confirmed that it (ASIC) does not favour the big end of town when it comes to enforceable undertakings (EUs).
The Australian National Audit Office (ANAO), responding to a recommendation from the Senate Economics References Committee has undertaken an audit of ASIC's handling of enforceable undertaking and has delivered a solid pass mark, but with some caveats including that the regulator does not actually measure or report on the effectiveness of its enforceable undertakings.
It said that the same applied with respect to its dealings with financial services firms which fell short of an EU, notably negotiated outcomes.
The ANAO report said that improved performance measurement and reporting would better inform key stakeholders, including Parliament, of the effectiveness of ASIC's regulation.
The report said that while ASIC had a sound basis for including particular terms in each EU it could act to ensure they were clearer about the misconduct that was the subject of ASIC's concerns.
"ASIC could also strengthen its capacity to assess compliance with, and the effectiveness of, EUs by more consistently including in the terms of an EU the requirement that the promisor report back to ASIC demonstrating their compliance with EU obligations," the audit report said.
The report also suggested that ASIC needed to be more transparent about its performance with respect to EUs, noting that while it has five KPIs that relate to EUs, it does not report externally on three of them and only partially reports against the other two.
"There would also be benefit in ASIC more systematically collecting information covering the costs of administering EUs, to help allocate its resources effectively and to ensure it is not placing an excessive burden on regulated entities," the ANAO report said.
On the question of action falling short of imposing an EU, the report said that based on information provided by ASIC, the ANAO identified that in 2013-14, ASIC finalised at least 113 negotiated outcomes other than an EU.
"However, given that ASIC does not have a policy, clear definitions or public register in relation to negotiated outcomes, these numbers are not exhaustive, and there are likely to be additional outcomes resolved through negotiations by the stakeholder and enforcement teams," it said. "To give regulated entities more certainty and to increase transparency, there would be merit in ASIC providing greater clarity around the circumstances in which it accepts and enters into other negotiated outcomes."
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