8.1 Existing mechanisms

8.1.1Parliamentary oversight

ASIC’s principal external oversight body is the Parliamentary Joint Committee on Corporations and Financial Services.[1]

The Joint Committee consists of 10 members, five from each House of Parliament.[2] Its duties are prescribed by section 243 of the ASIC Act and include inquiring into and reporting to each House on the activities of ASIC,[3] the operation of the corporations legislation[4] and any question connected with the Committee’s duties referred to it by either House.[5]

The Chair of ASIC is required to prepare and give an annual report to the Minister responsible for ASIC.[6] The report must include certain information[7] including information about ASIC’s monitoring and promotion of market integrity and consumer protection[8] and ASIC’s use of compulsory powers.[9] The Committee is also responsible for reviewing ASIC’s annual report.[10]

APRA is also subject to parliamentary and ministerial oversight. APRA’s members and senior executives regularly appear before Senate and House of Representatives parliamentary committees, as well as ad hoc parliamentary committees and inquiries.[11] The Treasurer and APRA’s members meet at least annually[12] and the Government reviews APRA’s annual budget and approves the levies that are imposed on industry each year to fund APRA‘s operations.[13]

Parliamentary oversight of ASIC and APRA is essential. It is essential because although broadly independent, regulators form part of the executive government and are therefore accountable to the legislature. But parliamentary oversight necessarily has some limitations. Those limitations include the amount of time that can be devoted to a particular entity or topic, the time available to committee members to prepare for the hearings and the training, skill and experience of the members of the committee, who will sometimes need to review and assess complex information on matters of expertise.

Mr Shipton acknowledged that the current arrangements for parliamentary scrutiny of ASIC could be improved. He suggested that ASIC could develop frameworks, metrics and methodologies for review of its performance.[14] The Joint Committee could then review ASIC’s performance against the agreed benchmarks.[15]

8.1.2Ministerial responsibility

ASIC and APRA are also both accountable to their relevant ministers. Ministerial accountability takes various forms. Both regulators are subject to direction by the Minister in particular respects.[16] Both are issued with statements of expectations from the Government,[17] which they respond to with a statement of intent.

These, too, are essential means of accountability.

The Uhrig Report identified limitations on the ability of ministers to ensure effective governance of statutory authorities, including:[18]

  • limitations on a minister’s capacity to direct authorities in terms of the conduct of their operations;
  • the presence of a board which does not have full power to act, having the effect of confusing and diluting accountabilities between the Minister, the board and the chief executive;
  • the lack of clarity in relationships and responsibilities reduces the capacity of ministers to be satisfied with existing accountability arrangements; and
  • the ‘hands off’ aura surrounding statutory authorities, which arises from the need for operational independence, means that the boundaries of the relationships between statutory authorities, ministers and portfolio departments are not clear to the participants.

Generally speaking, the power of the Minister is to determine some or all of each regulator’s policies or priorities. And while ministers may seek information or assurances from a regulator in connection with a funding request or budgetary cycle, it cannot be expected that ministers will comprehensively review the functioning of a regulator on a rolling basis.

As with parliamentary accountability, ministerial oversight of regulators is essential but has limitations.

8.1.3Regulator Performance Framework

Each of ASIC and APRA reports annually against the Government’s Regulator Performance Framework.[19] That framework, which was released in October 2014, is designed to apply generically to Commonwealth regulators of all kinds.[20]

The Regulator Performance Framework is not intended to serve as an assessment of the overall performance of regulators. It is, by design, more narrow in focus. The framework assesses Commonwealth regulators’ performance when interacting with business, the community and individuals against a common set of performance indicators. It is directed to establishing performance measures that encourage regulators to minimise their impact on those they regulate while still delivering the vital role they have been asked to perform.[21]

ASIC and APRA each publish self-assessments of their performance against the framework’s six indicators.[22]

8.1.4Other existing forms of oversight

There are some other oversight mechanisms that apply to the regulators.

Both ASIC and APRA submit annual reports that contain certified statements of their performance in accordance with the Public Governance, Performance and Accountability Act 2013 (Cth). Like other Commonwealth regulators, they are subject to the best practice regulation process administered by the Office of Best Practice Regulation.[23] They also engage with the Treasurer’s Financial Sector Advisory Council, which provides a forum for regulated entities to advise Government on financial sector policies and the performance of financial regulators. The Australian National Audit Office also audits ASIC and APRA’s annual financial accounts and occasionally undertakes ad hoc reviews of their performance.[24]

[1]The Senate Economics Committee and the House Economics Committee also have responsibilities in respect of referred matters concerning ASIC or any Treasury legislation in so far as it concerns ASIC.

[2]ASIC Act s 241(2).

[3]ASIC Act s 243(a)(i).

[4]ASIC Act s 243(a)(ii).

[5]ASIC Act s 243(c).

[6]See ASIC Act s 9A; Public Governance, Performance and Accountability Act 2013 (Cth) ss 12(2), 46.

[7]ASIC Act s 136.

[8]ASIC Act s 136(1)(b).

[9]ASIC Act s 136(2A) and ASIC Regulations 2001 (Cth) reg 8AAA.

[10]ASIC Act s 243(b).

[11]Exhibit 7.145, Witness statement of Wayne Byres, 27 November 2018, 25 [112].

[12]APRA, Statement of Expectations (2018), 4 December 2018, <www.apra.gov.au/statement-expectations-2018>.

[13]Exhibit 7.145, Witness statement of Wayne Byres, 27 November 2018, 25 [112].

[14]Transcript, James Shipton, 23 November 2018, 7023.

[15]Exhibit 7.63, Witness statement of James Shipton, 7 November 2018, 19–20 [61].

[16]For the Minister’s power to direct ASIC see ASIC Act s 12, but note s 11(17). For the Minister’s power to direct APRA see APRA Act s 12.

[17]See, eg, Exhibit 7.63, Witness statement of James Shipton, 7 November 2018, Exhibit JS-1 [ASIC.0800.0016.3087].

[18]John Uhrig, Report of the Corporate Governance of Statutory Authorities and Office Holders, June 2003, 53.

[19]Exhibit 7.145, Witness statement of Wayne Byres, 27 November 2018, 2 [112]; Treasury, Interim Report Submission, 41 [203].

[20] Commonwealth of Australia, Regulator Performance Framework, October 2014, i.

[21] Commonwealth of Australia, Regulator Performance Framework, October 2014, i.

[22] The indicators are: (1) regulators do not unnecessarily impede the efficient operation of regulated entities; (2) communication with regulated entities is clear, targeted and effective; (3) actions undertaken by regulators are proportionate to the regulatory risk being managed; (4) compliance and monitoring approaches are streamlined and coordinated; (5) regulators are open and transparent in their dealings with regulated entities; (6) regulators actively contribute to continuous improvement of regulatory frameworks. (See Commonwealth of Australia, Regulator Performance Framework, October 2014, 4.)

[23] Exhibit 7.145, Witness statement of Wayne Byres, 27 November 2018, 25 [112]

[24] Exhibit 7.145, Witness statement of Wayne Byres, 27 November 2018, 26 [112].