Outgoing watchdog chief puts non-bank lenders on notice
Australia’s corporate regulator is warning non-bank lenders and superannuation funds of stronger regulatory action if compliance in the opaque private credit and equity sectors does not improve.
Joe Longo, the outgoing chairman of the Australian Securities and Investments Commission, has published a road map under which the watchdog plans to increase investment in the country’s public and private markets while strengthening their integrity.
Before speaking to the National Press Club on Wednesday, Mr. Longo said the regulator wanted to be a promoter of investment, not a blocker.
“This roadmap sets out the choices and future of Australian markets. We want our private and public markets to grow. This growth means stronger businesses, more jobs and support for our economy,” he said.
The roadmap, which is accompanied by three industry-related reports, is the final stage of a major study being undertaken by ASIC amid concerns about a decline in initial public offerings and a lack of transparency in the growing private credit and equity markets.
It is estimated that private credit funds have grown by more than 500 percent in the last decade.
ASIC says there are positive aspects to the growth of private markets, such as increased availability of “patient” long-term capital.
But while some participants demonstrated strong practice, ASIC also witnessed many examples of poor practice that risked undermining confidence in the industry and hindering its development.
Commissioner Simone Constant said it was clear that increased oversight of private markets was essential.
“ASIC will continue to monitor and enforce private loans to ensure compliance with the law. If we do not see material improvements, we are prepared to take stronger regulatory action,” he said.
ASIC’s roadmap promised to provide new regulatory guidance to clarify fund managers’ obligations and improve industry standards.
The recent collapse of managed investment schemes First Guardian and Shield Master Fund has highlighted how failures in private market products can be devastating for Australian consumers.
Nearly 12,000 Australians lost up to $1.2 billion in their superannuation funds, prompting ASIC to collaborate with the government on legal reform to crack down on bad behavior in the industry.
ASIC has called on the government to provide more tools to audit funds, including data collection and independent auditing of wholesale funds.
The regulator will also continue its work to reform public markets and step up scrutiny of troubled exchange operator ASX.
The value of shares acquired in IPOs has fallen by 82 per cent in the last decade, with ASIC saying a lack of trust in the share market operator is a key factor.
The Australian Securities Exchange is under pressure from a series of system outages due to a botched overhaul of its clearing and clearing infrastructure.
“For Australia to remain competitive and attractive to investors and businesses, Australia’s public markets must be open to modernisation, innovation and reform,” ASIC said in a report published on Wednesday.
ASIC gave the green light to US-based market operator Cboe in October to provide listing competition to the ASX by allowing an alternative exchange in Australia.
But Cboe complicated things over the weekend when it announced it would put its Australian arm up for sale.
ASIC has promised to work closely with Cboe throughout the sale process to find a suitable buyer for Cboe Australia.
The Australian Banking Association, the Association of Superannuation Funds of Australia and the Financial Services Council have welcomed ASIC’s ongoing work to strengthen oversight of private markets.
“The industry agrees with ASIC’s assessment that there is a range of practices and that robust minimum standards are necessary to maintain regulators and consumers’ confidence in the industry at a time of rapid growth in the industry,” said Blake Briggs, chief executive of the Financial Services Council.
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