Who does this affect?

Hedge fund managers, prime brokers, investment banks, CDS counterparties, ratings agencies

What do you need to do?

Participants in the areas of priority should monitor how ASIC takes the priority areas forward and be prepared to make submissions when ASIC consults with industry.

Author
Jim Boynton  
Partner

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Jim Boynton  
Partner
T +61 2 9296 2086

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Scott Farrell  
Partner
T +61 2 9296 2142

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Sydney
Mark McFarlane  
Participants in the areas of priority should monitor how ASIC takes the priority areas forward and be prepared to make submissions when ASIC consults with industry. Damien Richard  
Participants in the areas of priority should monitor how ASIC takes the priority areas forward and be prepared to make submissions when ASIC consults with industry.

Melbourne
John Malon  
Participants in the areas of priority should monitor how ASIC takes the priority areas forward and be prepared to make submissions when ASIC consults with industry.

Canberra
Stephen Jaggers  
Participants in the areas of priority should monitor how ASIC takes the priority areas forward and be prepared to make submissions when ASIC consults with industry.

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The Chairman of the Australian Securities and Investments Commission outlined ASIC's priorities in an address to the Australian Corporate Lawyers Association on 7 November 2008. The priorities centre on capital markets, retail investors and consumers and international capital flows.

In addition, ASIC will continue to deal with issues as they arise and with what they call business as usual. It is clear that ASIC is keeping a close eye on overseas regulatory and IOSCO developments. This alert sets out some priorities of particular interest.

Court action to increase

The number of matters before the courts and with the Commonwealth Director of Public Prosecutions (CDPP) has increased and is expected to increase over the next 12 months . Currently, ASIC have 10 matters before the courts - 1 insider trading matter, 5 market manipulation matters, 2 on continuous disclosure, 1 on directors’ duties and 1 on misleading statements. In addition, ASIC has 12 other matters with the CDPP. Earlier this week a trader pleaded guilty to charges of market manipulation following an investigation by ASIC.

Rating agencies

ASIC has taken a no-action approach to the licensing requirements for credit rating agencies since 1995. In 2005, ASIC announced that it would grant ongoing licensing relief to credit rating agencies. ASIC provided a conditional exemption for certain agencies from the financial services licensing regime where they provide financial product advice in the form of credit ratings. The Government announced on 22 May 2008 that it would set up a joint working party of ASIC and Treasury to work on credit rating agency issues and advise Government.

OTC derivatives including CDSs

One of ASIC’s focuses is the over-the-counter markets. ASIC, the Australian Prudential Regulation Authority and the Reserve Bank of Australia have established a working group to monitor international industry developments (such as moves to implement a central counterparty for credit default swaps (CDS) in the United States), to review how the Australian practices compare, and to see what opportunities exist to harness these international developments to improve the efficient and transparent operation of Australia’s CDS market.

Further regulation of hedge funds

Unlike a number of countries, hedge funds can be offered to retail investors in Australia and hedge fund managers must be licensed. Over the coming months, ASIC will be consulting with industry and assessing what additional steps ASIC needs to take with the supervision and oversight of hedge funds. The two current issues ASIC identifies are the valuation of hedge funds’ portfolios in accordance with IOSCO’s valuation principles for hedge funds and the regulatory standards for funds of hedge funds, particularly for retail investors.