Altering ASIC’s remit would mark a sharp departure from the twin peaks model. I am not persuaded that the two principles underpinning the twin peaks model of financial regulation should now be abandoned or should be given substantially different effect by dividing ASIC’s regulatory role.
Detaching significant parts of ASIC’s remit and transferring them to another agency would disrupt the processes of responding to what has happened in the Australian financial services industry, and has now been brought into the public gaze by the Commission’s work. I think the costs of that disruption outweigh the possible benefits.
There is force in Treasury’s submission that there are some functions ‘that are core to the conduct regulator under the twin peaks model – and that should be kept together’.[1] The functions Treasury identified as ‘core’ were: ‘administering the necessary licensing regimes for financial services; preventing consumer detriment from inappropriate products and contracts; enabling consumers’ access to redress via dispute resolution and compensation; and enforcing the relevant law’.[2]
Further, as Treasury submitted, shifting responsibilities between agencies does not diminish the size of the tasks that have to be performed. Hence, what Treasury called ‘the overall resource demand’ is largely unchanged.[3] And any shift in responsibilities will necessarily have transitional costs of the kind Treasury mentioned (likely loss of experienced staff coupled with the costs of accommodating the new responsibilities in the new agency) accompanied by some measure of regulatory uncertainty.[4]
Importantly, I have no doubt that Treasury was right to say that ‘the impact of the breadth of remit on a regulator is largely a function of its leadership and resourcing (including staffing)’.[5] As Treasury said ‘[w]ith strong leadership and adequate resources (including staff), a broad remit is not a problem’.[6] But one of the chief challenges for leadership of a regulatory agency is fostering a proper culture. And as I sought to make plain in the Interim Report, the criticisms I made of ASIC were about the ways in which it responded to reports of misconduct, ways that might be seen as reflecting the prevailing culture of the agency.
In my view the enforcement culture of ASIC, not the size of ASIC’s remit, should be the focus of change.
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Recommendation 6.1 – Retain twin peaks The ‘twin peaks’ model of financial regulation should be retained. |
[1] Treasury, Interim Report Submission, 37 [184].
[2] Treasury, Interim Report Submission, 37 [184].
[3] Treasury, Interim Report Submission, 38 [188].
[4] Treasury, Interim Report Submission, 38 [189].
[5] Treasury, Interim Report Submission, 38 [188].
[6] Treasury, Interim Report Submission, 38 [188].