ASIC Publishes Strategic Outlook Identifying Risks and Concerns

ASIC has identified risks related to a range of issues including globalisation, innovation-driven complexity, gatekeeper conduct, and broad expectations of


The Australian Securities and Investments Commission (ASIC), has published its ‘Strategic Outlook for 2014–15’ which lists concerns, items worthy of vigilance as well as broader risks that impact investors and traders. The report sets out the key risks ASIC sees in the markets it regulates, and how it will respond if such risks transform into breaches. The Commission claims to “continuously scan the environment and use intelligence gathered from a wide range of stakeholders”.

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ASIC has identified risks related to a range of issues including globalization, innovation-driven complexity, gatekeeper conduct and broad expectations of market participants.

asic risks

ASIC Chairman Greg Medcraft said, ‘Being transparent about our role and priorities, the risks we see and how we will respond helps our stakeholders better understand what we achieve and why.” Adding, “Importantly, where we see non-compliance, we will act quickly and decisively. ASIC is a law enforcement agency and we will take action against entities, regardless of their size or reputation”.

The Retail Market

In terms of the retail market, ASIC officially admits that “exponential growth in technological developments and innovation” has “enhanced capacity, speed of order transmission, reduced trading fees and increased competition”. On the flip side, ASIC identifies challenges arising from innovation.

In the report, the Commission states, “digital disruption strategies have also created many significant challenges for market operators, market participants and investors, including potentially larger, more widespread trading disruptions, an increase in market fragmentation through a growing number of trading venues like dark liquidity, and considerable growth in cyber-crime, amplified in some cases by the speed of trading systems”.

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More broadly, ASIC sees the biggest risks affecting elderly savers and investors. “Poor retail product design and disclosure and misleading marketing may disadvantage consumers, particularly at retirement” says the report. Specific focus areas include social-media sites and comparison websites.

Institutional Market

In the institutional space, ASIC places emphasis on “the use of high-frequency trading and dark liquidity and their impact on the fairness of markets” as important aspects to concentrate future detection and data gathering resources. With so many revelations of market abuse and impropriety across the financial markets recently, ASIC says: “Poor conduct of some gatekeepers, companies, principals and intermediaries can jeopardise market integrity and investor outcomes”. In other words, if the gatekeeper messes around with the keys, few people will get to where they want to go.

Fighting Fire with Fire

ASIC plans to respond to any breaches by taking enforcement action when technological innovations have a negative effect on consumers. The regulator gives an example of possible enforcement action by saying “… target the retail foreign exchange market where new technology is used to attract investors and financial consumers through misleading statements”. Just recently, ASIC banned Monarch FX from operating in Australia due to various breaches related to margin foreign exchange trading. The regulator has taken action against ‘Invast Financial Services’ and ‘Global Derivative Services’ for various license breaches earlier this year. 

Cross-Border Activities

ASIC’s broader goal is to support the integrity of the Australian economy as a whole – not to mention help to attract international capital flows. The regulator states: “increased globalisation and cross-border activity may pose challenges to markets including the need to keep pace with relevant international regulatory standards to promote capital flows into Australia”.

The agency is also keen to set a standard that is second to none globally. In the report ASIC writes, “…the possibility that the direct listing of the same or equivalent over-the-counter derivative contracts by overseas licensees could give rise to inconsistent or lower standards”. In what could be interpreted as a protectionist stance or at least an elitist one, the Commission states, “the risk to Australian investors from emerging market issuers – entities listed in Australia that have substantial assets or management offshore in emerging markets – particularly where these entities have poor corporate governance and management systems”.

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