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Screenshot of a breaking news alert e-mail from Q2 2017
Australia’s federal government has begun to investigate the possibility of selling the companies registry division of its national financial markets regulatory authority, the Australian Securities and Investments Commission (ASIC), marking a potential switch from government interest when regulating financial markets, to private interest.
ASIC currently performs a series of functions on behalf of the central government of Australia, one being the regulation and oversight of all financial markets activity in Australia, and the other being the registration of all corporate entities in the nation, including exercising jurisdiction over deeming individuals suitable for directorship of companies.
According to a report today by the Sydney Morning Herald, the potential sale of the companies register has given rise to comment from senior academics. Professor Ian Ramsay of Melbourne University Law School, who also served on ASIC’s Advisory Committee previously, stated “You would need an appropriate form of oversight and that would have to include clearly guaranteed access to data by ASIC but I think it has to go well beyond that.”
“It is very important information. You may need some independent oversight of how the private sector is managing the business and its public interest obligations” continued Professor Ramsay.
He expressed that another concern was the likelihood that a private sector operator of the monopoly business would have “enormous power” to increase the price of the service well over the rate of inflation.
“I think the government would be compelled to put in place some restrictions on price increases” he said.
Professor Ramsay is in favor of removing some aspects of the administrating of the companies register from government ownership, however whilst understanding the fiscal benefits of doing so, stated that controls need to be put in place in order that a private operator acts in the best interests of clients.
ASIC has gained a very good reputation over the last two years for its stringent market oversight, lack of tolerance for insider dealing and strict surveillance of the margin FX industry, thus the nation is a first class location for reputable FX firms to establish business, as combined with the fine regulatory reputation, Australia has a very strong economy, excellent business ethics and close proximity to the all-important Asia Pacific region. Similarly, ASIC’s registrars are quick to strike off companies and directors who transgress.
Australia would not be the first Commonwealth country to take this route. Should it go ahead, the transfer of the companies register into private hands would echo that of Great Britain, however rather than transferring the British register of companies, Companies House, to a private entity or professional services and auditing company, it was established as a QUANGO (quasi non-government organization) in 2006 when the Companies Act was passed by the British parliament.
Prior to that, in October 1988, Companies House became an executive agency of the Department of Trade and Industry, and then in October 1991 started to operate as a trading fund, self-financing by retaining income from charges.
Futher academic comment on the proposals came from Australian Institute research fellow David Richardson, who stated that there could be concerns relating to the privatisation of the registry business, the major aspect being the dilution of ASIC’s ability to crack down on companies “Could a private operator offer crooked people some sort of secret registration arrangements or just go slow in getting the facts together following a request from the regulator?” he said.
Professor Richardson noted that since ASIC took over the ASX’s market supervision role in 2008 there had been a greater increase in prosecutions and other action regarding insider trading.
The move to pursue privatisation of ASIC’s registry business comes only weeks after Paris-based Financial Action Task Force criticised ASIC’s oversight and management of its registry after finding it was too easy for terrorists or international crime gangs to set up companies in Australia.
Governance Institute of Australia national director of policy Judith Fox pointed to the UK experience where the company registry business had been privatised with few problems, adding ASIC would still be able to carry out its enforcement activities, however she said that the organisation, which includes potential bidder for the registry business Computershare as a member, had concerns about privacy controls.
“Directors and officers are required by law to provide a degree of personal information and that’s absolutely appropriate for the regulator to have that information, but if the registry business is privatised that information cannot and should not be privatised.”
A spokeswoman for Finance Minister Mathias Cormann said the government would ensure legislative and regulatory changes would be made to ensure putting the business into private hands “will not lessen the existing verification requirements of directors for registering a company”.