The government has rushed new legislation to Parliament in the wake of its ushering in a new broom at ASIC, which will keep the regulator accountable to an independent authority charged with assessing its effectiveness.
The Financial Regulator Assessment Authority (FRAA) Bill 2021, introduced to Parliament last week, gives effect to a number of recommendations arising from the royal commission around creating a new body to assess the effectiveness and capability of ASIC and APRA.
Treasurer Josh Frydenberg announced the creation of the FRAA last month as he revealed outgoing ASIC chair James Shipton was to be replaced with current Herbert Smith Freehills senior adviser Joe Longo, with the authority to take a key role in advising Mr Longo as to what changes are needed to be made at the regulator.
According to the explanatory memorandum, the new authority will be made up of three part-time members to be appointed by the minister of the day, with the Treasury secretary or another Treasury employee to act as an ex-officio member.
“APRA and ASIC are independent regulators, responsible to the Parliament. This independence is critical to their ability to fulfil their mandates, and for them to have the confidence of the consumers who rely on them,” the bill stated.
“Regulator independence is also important for maintaining the confidence of the market, including in the credibility of the regulators.”
However, the new authority will not have the power to make comment on individual enforcement actions taken by the regulators “so that operational independence is not unreasonably impacted”, according to the explanatory memorandum. Nor will it be able to direct regulators to implement any of the recommendations made.
The bill notes that although ASIC is currently accountable to a number of parliamentary committees, committee members often lack “the fields of expertise required to assess the regulators”.
“Both agencies report extensively on their activities, but these reports are not necessarily subject to rigorous and consistent external analysis,” the explanatory memorandum said.
“Performance audits by the Australian National Audit Office are conducted on an ad hoc basis.”
The FRAA will be tasked with reporting every two years on the regulator’s effectiveness and capability.
“The Minister may request that the authority consider, or not consider, particular matters when undertaking an assessment of effectiveness and capability,” the bill stated.
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