Topic 1: Senior management responsibility for organisational conduct and culture
- organisational conduct; and
- organisational culture
- desktop research on relevant legal mechanisms in place in financial services regimes internationally, or in comparable legal regimes in Australia (including reform proposed under the FSI Report 2014); and
- empirical research about the potential efficacy of imputing responsibility for organisational conduct and culture on senior management, and, to the extent possible, the relative deterrent effect of imputing such responsibility:
- at the organisational level;
- at the senior management level; and
- to other individuals within the organisation who are directly responsible for misconduct.
Topic 2: Peer disciplinary panels in the financial services and credit industries
- panels of industry members that sit within the regulatory framework;
- hear matters relating to potential misconduct by an industry member, and decide whether misconduct has occurred; and either:
- have the power to decide on and apply a sanction in relation to the misconduct; or
- recommend a sanction to be applied by ASIC.
- a model or models that may be most effective within the Australian financial services and credit regulatory regimes; and
- any industry characteristics or pre-conditions that are likely to make peer disciplinary panels more successful, including the presence and maturity of self-regulatory structures in the industry.
- desktop research about potential models for such a peer panel (e.g. looking at existing models internationally or overseas) and their relative merits; and
- empirical research about the potential deterrent impact of peer judgment in the financial services and credit industry.
- the Companies, Auditors and Liquidators Disciplinary Board, a statutory disciplinary tribunal, a number of members of which are selected by the Minister on the basis that they are representatives of the business community; and
- the Markets Disciplinary Panel, which consists of part-time members with relevant market or professional experience, and which exercises power delegated by ASIC to issue sanctions in relation to breaches of market integrity rules.
Topic 3: Efficacy of enforceable undertakings
4.49 While it is important for transparency that compliance with EUs is reported, it is also important that ASIC goes further and assesses more broadly the effectiveness of each EU in achieving improved compliance.
4.50 As discussed in Chapter 2, ASIC does not currently systematically measure and report (internally or publicly) on the effectiveness of individual EUs in achieving desired outcomes. Though stakeholder teams and SELs often have a sense about the effectiveness of particular EUs in generating behavioural change, there would be merit in ASIC taking steps to more systematically collect data and report on these outcomes. The reporting obligations in many EUs (as well as other reporting obligations outside EUs) position ASIC well to report on compliance outcomes, as outlined below:
- for five of the eight EUs where multiple expert reports were provided under the EU, there was an improvement in the promisor’s compliance in subsequent reports compared to the initial report—suggesting that the review process had led to improved compliance;
- in one case, after acceptance of an EU and following an independent expert review process, an Australian financial services licensee (AFSL) began submitting AFSL breach reports in relation to newly identified instances of prior non‐compliance—suggesting that the EU had led to the promisor taking their AFSL obligations more seriously; and
- in one case, ASIC continued to receive regular reports of misconduct in relation to the conduct of franchisees of a franchisor whom ASIC had accepted an EU from—suggesting that greater attention may need to be given when accepting future EUs involving franchise operations.4.51 While these examples demonstrate the effectiveness of EUs in providing specific deterrence, the impact of EUs as an effective regulatory tool for deterring and educating regulated entities more generally is also important, as discussed in Chapter 2.’
Research Officer, Australian Centre for Financial Studies
Phone: (03) 9666 1012