More or Stronger Financial Regulation?
Financial institutions that manipulate financial benchmarks will now be hit with specific civil and criminal penalties thanks to amendments legislated by the Turnbull Coalition Government.
The law will better protect Australians from the possible abuse of financial markets by sophisticated financial institutions.
What constitutes better is a moot point however, as more or stronger not necessarily mean better if seen as part of a framework that needs to be followed if not enforced to the advantage of all Australians. In today’s world this also means internationally relevant and translatable for any regulation to be fully effective.
The manipulation of any financial benchmark, or product used to determine such a benchmark, is now a specific offence and subject to civil and criminal penalties.
This includes maximum penalties of up to $945,000 and or 10 years imprisonment for individuals and up to $9.45 million for bodies corporate.
Importantly, these penalties can be used against foreign nationals and bodies corporate, even when the conduct occurs abroad and results in an Australian entity suffering a financial loss or other disadvantage.
Financial benchmarks are used to help value trillions of dollars of financial products and have proven to be a weak spot in the international system of financial regulation.
There have been many cases of market misconduct regarding the determination of financial benchmarks, such as the London Interbank Offer Rate (LIBOR), all around the world.
Administrators of significant benchmarks will now be required to hold a ‘benchmark administrator’ license and comply with enforceable rules made by the Australian Securities and Investments Commission (ASIC).
Power to compel!
The law will also provide ASIC with a new power to compel submission to a significant financial benchmark, as a last resort in the case that other calculation mechanisms have failed, and the continued generation of the financial benchmark is threatened.
Under the Australian law, legitimate business activity that has the effect of moving a benchmark (but not the intent) would not constitute an offence.
The Australian Treasurer, Scott Morrison is pleased these reforms will bolster critical components of Australia’s market architecture and improve the integrity, resilience and fairness of the Australian financial system.
Furthermore, they will align Australia’s regulatory regime with international best practice, including regimes in the United Kingdom, the European Union, Japan, Singapore and Canada.
Enter ASIC, a saviour?
In the same spirit, the Turnbull Coalition Government has introduced legislation into the Parliament to enhance the Australian Securities and Investments Commission’s (ASIC’s) capabilities, by providing it with greater operational flexibility and making express provision for the regulator to consider competition in its decision-making processes.
Removing the requirement for ASIC to employ people under the Public Service Act 1999 will give ASIC greater operational flexibility and brings ASIC into line with the Australian Prudential Regulation Authority (APRA) and the Reserve Bank of Australia (RBA). ASIC will now have the ability to attract and retain the most appropriate people, to achieve its short and long‑term priorities.
To be able to perform their roles effectively in accordance with their legislative mandate, regulators need to be able to attract and retain suitably skilled and experienced staff, the Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, said.
Competition in the financial system is critical to ensuring the system delivers good outcomes for Australians. Competition puts strong discipline on businesses to lower costs associated with the delivery of financial products and services. It further encourages innovation and deployment of new technology, and delivers more choice for consumers, at lower prices.
Ultimately it is competition not regulation that is the best means of ensuring that consumers and investors get value for money in financial products and services. Both consumers and financial product and service providers, particularly new entrants, benefit from a more competitive financial system.
The Turnbull Coalition Government is committed to delivering strong and effective regulators to govern Australia’s financial system. This is the best way to ensuring that Australia’s financial system both protects and meets the needs of Australian consumers and investors.
This Bill, legislation, enacts key recommendations from the Financial System Inquiry and the ASIC Capability Review. It is further evidence of the Government’s commitment to strengthening ASIC, to ensure the financial system delivers fair and optimal outcomes for all Australians.
The Turnbull Coalition Government is clearly heading in the right direction. The question remains if it is heading fast enough and if the government is thinking ahead sufficiently in the financial space to include trends in the world economy, FinTech and national sentiments that will give it credit for these achievements in financial regulation and enforcement. At the next general election this credit will be tested against the claims in terms of jobs and growth for Australia and Australians.
What is your understanding in terms of contribution to jobs and growth by financial regulation in Australia?
A. A Turnbull success?
B. A Turnbull waste?
C. A Turnbull failure?
Please make a comment!