ASIC has issued a call to market intermediaries to enhance their supervisory mechanisms for overseeing business communications among representatives.
The move aims to curb misconduct and ensure adherence to financial services laws.
ASIC’s Information Sheet 283, titled “Supervising your representatives’ business communications” (INFO 283), addresses the increasing risk posed by the use of unmonitored and encrypted communication channels. These channels could potentially allow financial misconduct to go undetected.
The document offers practical guidance to entities such as investment banks, securities dealers, and corporate advisers on how to manage these risks. It details the necessity of embedding robust supervisory arrangements for business communications and regularly reviewing their effectiveness in line with obligations under the Corporations Act 2001 and ASIC market integrity rules.
ASIC commissioner Simone Constant (pictured above) stressed the critical role of market intermediaries in maintaining the integrity of Australia’s financial markets.
“Bankers, dealers, and market participants have important roles as gatekeepers to Australia’s financial markets and stewards of market integrity,” Constant said.
She also highlighted the importance of maintaining strong supervisory arrangements to prevent harm to clients and the market.
“Misconduct, such as the misuse of confidential or inside information, market abuse, insider trading, market manipulation, bribery, and fraud, hurt Australian investors by damaging their confidence and wiping value from their investments,” Constant said.
The rapid evolution of technology, the use of personal devices, and the adoption of remote or hybrid work environments pose additional challenges for monitoring and record-keeping by licensees.
Constant elaborated on the expectations from the market intermediaries.
“We expect market intermediaries to periodically review their arrangements for supervision of business communications, so they are working effectively, and are appropriate for the nature, scale, and complexity of their business,” she said.
The release also refers to recent enforcement actions by international regulators such as the US Securities and Exchange Commission and the Commodity Futures Trading Commission, which have taken significant steps against financial institutions for failing to preserve electronic communications.
Since 2016, ASIC has been actively monitoring the implementation of substantial remediation programs required under court enforceable undertakings with several market intermediaries.
These programs are designed to strengthen systems, controls, training, guidance, and frameworks for monitoring and supervising representative communications, particularly concerning spot foreign exchange contracts and BBSW-referenced products.
Insights from these efforts are reflected in Information Sheet 283, aiming to further fortify the regulatory framework surrounding business communications in the financial sector.
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