Developing regulatory reform

Regulation provides the framework for a resilient and dynamic financial system. It necessarily involves appropriate enforcement tools provided for in the law to promote market confidence and investor participation.

But the Australian Securities and Investments Commission (ASIC) also has a statutory obligation to facilitate and improve the performance of the financial system. We are further obliged to do this in a way that reduces costs and supports commercial certainty and economic growth.

While we can achieve these obligations by granting individual waivers (relief) from the law to companies or issuing guidance, ASIC is also looking for other ways to cut the regulatory burden where there is reason to do so.

Good regulatory reform

The most effective regulation is that which addresses a specific problem and does that with as little intervention as necessary.  Ideally, it is regulation that entities want to comply with because they know it makes their own business or the system as a whole better.

A rigorous approach to analysing the need for regulation, and gathering evidence about that need and how it may have evolved, is important to good regulatory reform. This involves consulting with affected or interested parties on areas of reform, and gathering empirical evidence of the benefits or costs of implementing the reform.

Being transparent about what we are doing and how we intend to do it not only reduces the risk of surprises, but also means we are informed by the people who will have to work with the rules we make. This is why ASIC has a strong focus on consultation. The consultation process is critical to both understanding regulatory issues and to developing a solution that targets the behaviour that we want to prevent, but goes no further.

There are times, however, where a problem is identified and a solution designed in consultation with industry and consumer representatives, and regulators and policy makers still do not get it perfect the first time. Circumstances change and the arch enemy of policy makers – unintended consequences – arises. It is very important to continue to reflect on and review regulations to determine whether they remain fit for purpose, proportionate and appropriate.

Cutting red tape

The government has a target of $1 billion in red tape reduction each year. So, ASIC is looking for ways to remove red tape.

ASIC has already made significant progress in contributing to the government’s target, reporting more than $60 million in compliance cost savings in the year to September 2014 alone.

In choosing what areas to focus on ASIC has sought input from staff and also from our regulated population. We have found that there seems to be no single area of law or regulation that businesses are pointing to and telling us it is strangling them with red tape. It is more the cumulative impact of many regulations.

We have seen opportunities to remove or reduce red tape through:

• Upgrading ASIC systems to increase accessibility and save time for people searching for information.
• Providing relief (waivers) to enable the law to accommodate innovation or unanticipated outcomes.
• Issuing regulatory guidance to reduce the cost of complying with regulation.
• Recommending law reforms to the government when we identify changes that might reduce business costs while maintaining regulation for investors and financial consumers. 

Another example of reducing compliance costs is re-evaluating the data and information we collect. While we use the majority of information collected in our forms, we have identified some that can be streamlined or are no longer required so we are looking at ways to cut red tape in this regard.

The way we go about administering regulation does matter. Cutting red tape is not just about removing regulatory obligations. ASIC has been looking at interactions we have with our regulated population, including aspects of compliance, to make sure that what we are asking or imposing does what it was intended to do, and in the most efficient way.