The Australian Securities and Investments Commission (ASIC), which regulates corporate, market and financial services and markets in Australia, has been recognized as an enthusiastic supporter of fintech since the launch of its Innovation Hub in 2015.
Key insights
- ASIC is learning regtech providers' key challenges and opportunities, as well as barriers or constraints that may impact the successful and rapid take-up of regtech developments
- ASICis encouraging the development of more effective and efficient regtech applications, but it is not taking the over-arching organizational role
- ASIC sees an important part of its role as talking to its regulatory peers – domestic and international – to keep abreast of developments in the regtech arena
ASIC has further extended its engagement with the regtech sector by hosting its first regtech roundtable discussion (in February 2017), establishing a new regtech liaison group, and committing to continuing future technology trials.
Regulatory technology can help organizations build a culture of compliance
In a report published in May 2017, 'ASIC's Innovation Hub and our approach to regulatory technology,' ASIC stated that it "believes regulatory technology can help organizations build a culture of compliance, identify learning opportunities, and save time and money on regulatory matters while improving compliance and outcomes for consumers."
The report proposes that ASIC might boost its emphasis on supporting regtech developers with initiatives such as:
- establishing a regtech liaison group comprising industry, technology firms, academics, consultancies, regulators and consumer bodies, to enable networking, discussion of regtech developments and collaboration opportunities that promote positive applications of regtech
- continuing to hold regtech trials and sharing knowledge about those trials with the market to promote wider use of technologies that promote good consumer and market integrity outcomes
- hosting a problem-solving event (“hackathon") later in 2017 to stimulate thinking and approaches to deal with problems of regulation commonly faced by the financial services sector
ASIC has committed to a series of regtech trials within its regulatory, supervisory and enforcement activities
ASIC has committed to a series of regtech trials within its regulatory, supervisory and enforcement activities. It has tested a cognitive tool to analyze webpages set up by providers of self-managed superannuation fund (SMSF) services, as well as machine learning applications that assess documents for evidence in investigations. ASIC has also discussed developments in the regtech arena with its domestic and international regulatory peers.
The newly formed Australian RegTech Association has agreed to participate in ASIC's new liaison group and will work alongside the regulator to explore the possibilities that regtech may offer.
Matt Symons, founder of machine learning and artificial intelligence-based regtech player Red Marker and director of the Australian RegTech Association, welcomes ASIC's proactive engagement. “If regtech is further fostered and some of its predictive and real-time correction and training capabilities are nourished, ASIC's job would be easier, because compliance would be stronger, and the culture of compliance is strengthened, and you have 'compliance-by-design,' which is about embedding compliance into the standard processes that you have in place," he said.
Supporting regtech
ASIC has identified a role for itself in establishing best practices and guiding principles for the regtech sector rather than seeking to take the over-arching organizational role, according to Mark Adams, ASIC Senior Executive Leader, Strategic Intelligence.
"We're not organizing and facilitating adoption – we don't certify providers' regtech solutions," said Adams. "We're not necessarily going out to the regtech community and saying, 'these are the things we'd like to see,' but we do want to identify problems that the providers see, and possible solutions"
Adams added the regulator was in a unique position as a potential user itself of new technologies and wants to be viewed as "a leader" in regtech. ASIC sees the potential for regtech to help its regulated base, as well as create efficiencies and improve its monitoring and supervisory activities.
ASIC sees the potential for regtech to help create efficiencies and improve its monitoring and supervisory activities
"A lot of the technological challenges for firms, how new technologies inter-operate with legacy systems, it's the same with ASIC – we don't want to have multiple stand-alone systems, we want them to inter-operate as much as possible," Adams continued. “We want to tell our story, as a way of stimulating and promoting people thinking about new forms of technology."
ASIC also aims to educate the marketplace, promote collaboration and networking, and demonstrate to the market that regulators are willing to learn from the fintech and Regtech sectors.
Liaison with industry
ASIC's next step is to host a “problem-solving event" where the regulator will foster discussion with providers about the challenges and opportunities they have identified, as well as any barriers or constraints to the successful adoption of regtech developments.
Initially, ASIC partnered with the regtech sector in a roundtable discussion in February 2017 to scope out the current regtech landscape. The aim was to focus on its development path, and the potential to promote good risk management and compliance outcomes. The session was also focused on understanding the drivers and barriers to Regtech in Australia, and identifying areas where the industry, and ASIC, can help promote its development and application.
ASIC sees the sector as having enormous potential to support financial firms in building a culture of compliance and identify learning opportunities, and bringing further efficiency around regulatory matters.
"We also think it has the potential to complement the work that we do, in many ways, so it's against that backdrop that we have to focus on regtech," said Adams.
Adams concluded that the challenge for ASIC is to consider what it can do as a regulator to facilitate compliance for its financial market participants. "There are things we can do to promote easier compliance, and use of our guidance around the regulatory framework, as well as making regulatory reporting systems work as efficiently as possible. They are some of the things we can do to try to contribute to the overall goal of more effective and efficient regtech applications."
Sources
- Australian Securities & Investments Commission (May 2017) ASIC's Innovation Hub and our approach to regulatory technology