Reforms To The Supervision Of Australia's Financial Markets

by Mary Swire, LawandTaxNews.com, Hong Kong

27 August 2009

The Australian government has announced changes to the supervision of the country's financial markets, with the stated purpose of enhancing their integrity and, ultimately, of establishing Australia as a financial services hub in the region.

The government has decided that the Australian Securities and Investments Commission (ASIC) should supervise the real-time trading on all of Australia's domestic licensed markets. This change, it was said, will mean that ASIC will now be responsible for both supervision and the enforcement of the laws against misconduct on Australia's financial markets.

The Minister for Financial Services, Chris Bowen, said that: “As part of the government's drive to improve regulation of the financial industry, the government has decided to transfer supervisory responsibility for Australia's financial markets to ASIC as it is more appropriate for an agency of the government to perform this important function.”

The present arrangements require individual financial markets to self-supervise their trading, but the new reform, it is said, is in line with the move towards centralised or independent regulation in other leading jurisdictions.

“Having one whole-of-market supervisor will consolidate the current individual supervisory responsibilities into one entity, streamlining supervision and enforcement, and providing complete supervision of trading on the market,” Chris Bowen said. “Moving to whole-of-market supervision is also the first step in the process towards considering competition between market operators.”

It was further explained that the changes will mean that ASIC will become responsible for supervising trading activities by broker participants which take place on a licensed financial market, while individual markets – such as the Australian Securities Exchange (ASX) - will retain responsibility for supervising the entities listed on them.

“The supervision of listed entities raises a different set of issues. The government is comfortable that there is no need for the government to supervise listed entities. ASIC and the ASX are working well together in performing this role,” Chris Bowen added.

It is intended that legislation will be introduced into Parliament next year to give effect to this change, with ASIC to begin performing these functions in the third quarter of 2010.

In a separate move, Chris Bowen has also released, for public comment, draft regulations in relation to the national regulation of margin lending facilities, the national regulation of trustee companies and enhancements to the regulation of debentures. Submissions are due by 18 September 2009.

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