Discussion: ASIC (Australian Securities and Investment Commission) & APRA (Australian Prudential Regulation Authority)

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1. Question 2

(b) Some corporations in Australia are regulated by the Australian Securities and Investment Commission (ASIC) and also by the Australian Prudential Regulation Authority (APRA). With Reference to case law and legislation explain why.

1.1 Basic concepts

1.1.1 Australian Securities and Investment Commission (ASIC)

ASIC which is short for Australian Securities and Investment Commission, is formally responsible to ensure the market integrity and protection of the consumer as well as the regulation of investment banks and finance companies.

1.1.2 Australian Prudential Regulation Authority (APRA)

The authority of Australian Prudential Regulation Authority (APRA) a statutory and the prudential regulator of the Australian financial services industry, the targeted companies and institutions include life insurance fund, investment banks, commercial banks and other similar financial institutions. Different from those which are under supervision of Australian Securities and Investment Commission (ASIC), organizations and institutions under the regulation of Australian Prudential Regulation Authority (APRA) are subject to the requirement that they should report regularly to the authority.

1.2 Dual regulations

Though these two authorities have different coverage in term of regulation of different types of business entities, but there have long been some dual regulations which result in complication in the financial sector supervision. For example, companies in the superannuation industry had long been requested to make a breach report to both Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) regarding the irregularity behaviors under the supervision of the APRA-administered Act and also the ASIC Act. Such dual regulations could also be seen from other industries especially when there are business behaviors or irregularities which are serious to trigger the application of the management from both parties.

1.3 Rationality of using two different authorities

There are two major reasons behind the dual regulations by two different parties: first of all, the two authorities have different focus in term of regulating entity types, as just mentioned, APRA target companies and institutions include life insurance fund, investment banks and commercial banks and similar entities, but there are overlapping to make sure that a strict management and legal supervision is implemented and also loose holes would be minimized.

Secondly, as mentioned above organizations and institutions under the regulation of Australian Prudential Regulation Authority (APRA) are subject to the requirement that they should report regularly to the authority, this division into two different functional parties is used to ensured that these key institutions are supervised closely.

1.4 Attempts to reduce the dual regulations

First of all, there are changes and amendments made to the legal system and regulations. For instance, the SRR Act, which received Royal Assent on 24 September 2007, has included several key amendments that brought changes to simplify the dual regulations which would be of unnecessarily high cost in supervision; the revised Act offers an optional system for the business companies or institutions which are under the management and supervision of both authorities to report the relevant irregularities to a single authority, i. e. the APRA. In addition, the APRA legalize such single reporting by introducing an addition of a treaty into the Corporation Act 2001 to permit a single reporting of the relevant breaches to only APRA within the given period of time. And technically, to facilitate such easy and cost saving reporting system, the online reporting system has allowed the organizations and institutions to report the breaches using the system which will later update the database of both authorities to save up time and relevant efforts.

Secondly, to ensure the viability of the single reporting system, the two authorities also changed the time requirement of the breach requirement to a 10 day requirement to make sure that in this point, there would not be additional conflicts between the two authorities.

Reference

Asic.gov.au. Streamlining breach reporting. Accessed on 15 Apr 2012 [online] http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/APRA-ASIC_discussion_paper_Streamlining_breach_reporting.pdf/$file/APRA-ASIC_discussion_paper_Streamlining_breach_reporting.pdf

Euronetting.com 2005. What is Multilateral Netting? Accessed on 15 Apr 2012 [online] http://www.euronetting.com/overview/docs/What%20is%20Netting.pdf

Rba.gov.au 2011. Payments System Board. Accessed on 15 Apr 2012 [online] http://www.rba.gov.au/payments-system/policy-framework/psb-board.html