On March 28, the Federal Government introduced the Treasury Laws Amendment (Enhancing ASIC’s Capabilities) Bill into Parliament, following recommendations of the Financial System Inquiry and the ASIC Capability Review. The Bill seeks to amend the Australian Securities and Investments Commission Act 2001 (“ASIC Act”) enabling ASIC to operate with greater flexibility and consider competition in its decision making processes.

The amendments outlined in Schedule 1 specify that ASIC must consider the effects its functions and powers will have on competition in the financial system. This serves to implement recommendation 30 of the Financial System Inquiry which encouraged the government to consider competition in ASIC’s mandate.

According to the Bill’s explanatory memorandum, “an explicit reference to take competition issues into account would oblige ASIC to consciously consider how its actions may impact on competition in the financial system and will enable ASIC to favour one option over another due to its effects on competition.”

In promoting competition, ASIC should have regard to;

  • whether the decision will create a barrier to entry, making it more difficult for new firms to enter the industry;
  • whether the decision will create regulatory advantages for some companies over others competing in the same sector, or generally across the industry as a whole;
  • whether the decision will improve consumers’ ability to exert demand-side competitive pressure in a market;
  • whether the decision will disproportionately impact small entities (for example by imposing obligations that do not appropriately scale the regulatory risks presented by those entities) and the impact that would have on competition; and
  • whether alternative competitively-neutral approaches can be identified.

Schedule 2 amends the ASIC Act and removes the requirement for ASIC to engage staff under the Public Service Act 1999 (PSA). In doing so, the act adopts recommendation 24 of the ASIC Capability Report which endorsed more effective recruitment and retention strategies.

Removing the obligation for ASIC to engage staff under the PSA means ASIC will be able to compete more effectively for suitable staff. It will also allow ASIC to tailor management and staffing arrangements to suit its needs, ensuring it can effectively honour its mandate by recruiting staff with knowledge of financial markets and financial services.

Thus, the amendment serves to promote greater operational flexibility, bringing ASIC in line with Australia’s other financial regulators, namely the Australian Prudential Regulation Authority and the Reserve Bank of Australia.

The bill will come into effect on 1 July 2019, at which time ASIC staff will maintain their continuity of service with ASIC, but cease to be employed under the PSA. They will instead be employed under the ASIC Act, subject to the same terms and conditions and will maintain the same accrued entitlements.