Objectives of regulation
The purpose of regulation is to provide certain outcomes that are in the public interest which would otherwise not be produced by competition or other market forces. Consistent with international standards 1, the overarching objectives of:
- regulation of financial markets – are protecting investors, ensuring that markets are fair, efficient and transparent and reducing systemic risk; and
- FMI regulation – are to enhance safety and efficiency, to limit systemic risk and foster transparency and financial stability.
- In exercising the delegated powers, the delegate is expected to take into account these objectives.
Matters Minister must have regard to under the Corporations Act
When exercising a delegated power, the delegate is subject to the same limits that the Minister would be subject to if the Minister was exercising the power. For instance:
- when making decisions in relation to granting a licence; imposing, varying or revoking licence conditions; suspending or cancelling a licence; or disallowing a change to the operating rules of a licensed market or CS facility, the delegate must have regard to the factors outlined in sections 798A and 827A of the Corporations Act; and
- when making a decision to vary a licence condition so as to add another market or CS facility, the delegate must be satisfied of the matters mentioned in subsections 795E(3) and 824E(3) of the Corporations Act.
Consideration of ASIC’s aims
The delegate should have regard to subsection 1(2) of the ASIC Act, which states that in performing its functions and exercising its powers, ASIC must strive to:
- maintain, facilitate and improve the performance of the financial system and entities within the system in the interests of commercial certainty, reducing business costs, and the efficiency and development of the economy;
- promote confident and informed participation by investors and consumers in the financial system;
- administer the law effectively and with minimal procedural requirements; and
- enforce and give effect to the law.
Consideration of competition
The delegate should, to the degree practicable, ensure that the exercise of any delegated power promotes competition. In meeting this condition, the delegate should therefore strive to:
- facilitate competition between entities who are subject to the regulation; and
- consider the impact of matters under the delegation on other stakeholders that may be affected by the decision, including other market operators.
Consideration of Government’s commitments and priorities
The delegate is expected to exercise the delegated powers in a way that aligns with the Government’s priorities and commitments. For example, one of the Government’s priorities is to stimulate innovation in the financial system in order to better support the operation of the economy. The Government also maintains a strong commitment to establish Australia as a financial hub within the Asia Pacific region.
Consideration of RBA’s aims
When exercising the delegated powers relating to CS facilities, the delegate is expected to:
- ensure there has been adequate consultation with the RBA ahead of any exercise of the delegated powers, allowing adequate time for consideration and response taking into account the nature of the power being exercised;
- consider any advice and recommendation provided by the RBA (and ASIC) when exercising any delegated power in relation to CS facilities; and
- ensure delegated powers do not frustrate crisis management actions including, once the RBA has such powers, the RBA’s issuance of directions in recovery or actions in resolution.
Timeframes for the exercise of the delegated powers
In exercising the delegated powers, the delegate will be subject to the same statutory timeframes as the Minister for decision-making. However, in order to enhance efficiencies, the delegate is expected to set more expedient performance indicators for the execution of the delegated powers and periodically review the indicators. If required, the delegate should share performance indicators with the Minister.
1 The relevant international standards are the International Organization of Securities Commissions (IOSCO) Principles of Securities Regulation and the Committee on Payments and Market Infrastructures (CPMI)-IOSCO Principles for Financial Market Infrastructures.