Nick Dignam from Fortitude Investment Partners shares insights with Lachlan Maddock from Fortitude Investment Partners on how a diversified portfolio in mid-market private equity is structured. The Inside Adviser
The world of alternative investments is at a crossroads. As markets defy expectations and liquidity concerns take centre stage, investors find themselves forced to rethink how they deploy capital in an increasingly complex environment.
ASIC granted new powers over financial market infrastructure entities
The corporate regulator will gain an expanded suite of powers over entities that operate within financial market infrastructure, including the Australian Stock Exchange, after a Bill based on recommendations made by the Financial Council of Regulators way back in mid-2020 was passed in parliament last week.
The Bill will see ASIC gain a new crisis management and resolution scheme, as we as enhanced supervisory and enforcement powers so that it can better “monitor the ongoing conduct of FMI entities, identify risks as they emerge, and take appropriate action to prevent those risks from escalating”.
The Treasury law amendment will also “streamline and transfer” the roles and responsibilities shared by the financial services minister’s office, ASIC and the Reserve Bank of Australia.
The entities that provide the bulk of financial services infrastructure, which ASIC will now have greater oversight of, include financial market operators, benchmark administrators, clearing and settlement facilities, plus derivative trade repositories.
The Bill comes after a report from the Council of Financial Regulators warned that the financial system’s reliance on financial market infrastructure had “significantly increased” following the 2008 global financial crisis and subsequent reforms. When the council penned the report, back in 2020, FMIs in Australia supported transactions in securities to a value of AU$18 trillion and derivatives to a total annual notional value of AU$185 trillion.
“A disruption to the orderly provision of FMI services could cause a disruption to the wider financial system, which may have large economic costs,” the report stated, noting that the then-emerging pandemic highlighted that unforeseen events like the GFC were bound to happen again.
As the regulators of FMIs, the RBA and ASIC need “strong and dependable powers” to carry out their mandates and monitor risk, the report said. “However, the options available to the Regulators to address the potential insolvency of an FMI or other severe threats to its continued operation are very limited.”
The council also noted that the regulators’ combined need for stronger powers had previously been acknowledged by the 2014 Financial System Inquiry, as well as International Monetary Fund’s 2019 Financial System Assessment Program review.
An enhanced toolkit
According to ASIC commissioner Simone Constant (pictured), the new laws provide a “fit-for-purpose regulatory regime” for critical financial market infrastructure.
“The reforms significantly enhance ASIC’s regulatory toolkit for FMIs, clarify the scope of the Australian licensing regime for overseas markets and CS [clearing and settlement] facilities, and empower us to make rules to promote the fair and effective provision of services by licensed CS facilities,” Constant said. “Collectively, these new powers help ASIC ensure the Australian financial system is supported by resilient, efficient, and stable FMIs.
‘We are reviewing our approach to the regulation and supervision of FMIs to ensure that we make the most effective and efficient use of our expanded powers,” she continued.
“We will work closely with the RBA and industry to develop and provide information and guidance on the use of our new powers across this multi-year program of change.’
