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MIU - Issue 179 - October 2026

Issue 179 of the Market Integrity Update covers regulatory developments and issues affecting markets.

ASIC charts course for digital asset regulation

ASIC has unveiled its proposed guidance and standards to implement new laws for digital asset platforms and tokenised custody platforms that begin in April 2027, as part of an industry consultation. The package gives industry greater clarity to innovate with confidence.

ASIC’s Consultation Paper 392 outlines its proposed approach to standards and regulatory guidance about complying with the new digital asset framework introduced by the Corporations Amendment (Digital Assets Framework) Act 2026 (DAF Act).

The consultation package includes draft guidance on how to comply with the new laws, proposed standards on asset-holding activities, trading and settlement activities, and proposed financial requirements for licensees.

ASIC Commissioner Alan Kirkland said that the package acknowledges the increasing role of digital assets and tokenisation, including in traditional parts of the financial system.

‘Our approach is based on the principle of “same activity, same risk, same regulatory outcome” to align Australia with the approach of comparable overseas jurisdictions. Bringing digital asset platforms and tokenised custody platforms into the financial services regulatory framework means consumers can have greater confidence when trading digital assets.'

ASIC’s proposed guidance explains how the digital assets framework applies to:

  • operators of Digital Assets Platforms (DAPs) and Tokenised Custody Platforms (TCPs), and others providing financial services for these new products, and
  • existing Australian financial services (AFS) licensees, market participants, payments providers and other businesses that use or deal with digital assets.

ASIC’s proposed guidance outlines that firms will need to:

  • apply for (or vary) an Australian financial services licence
  • provide customer disclosure documents and platform rules, and
  • comply with asset holding standards, transactional and settlement standards, and net tangible asset requirements, where relevant.

ASIC is also proposing to streamline licensing processes for existing AFS licensees and those who applied for an authorisation in response to INFO 225 adding DAP or TCP authorisations, to help with a smooth transition to the new regime.

ASIC’s consultation is open until 5pm AEDT 27 November 2026. More information, including how to make a submission, can be found here. 

ASIC strengthens AI trading safeguards and streamlines market integrity rules

ASIC has strengthened safeguards for automated and AI-enabled trading while streamlining regulatory requirements for securities and futures market participants, under incoming changes to its Market Integrity Rules. 

The reforms bolster important gatekeeper controls requiring participants to test, monitor and govern trading systems and algorithms as markets evolve and the adoption of AI increases. These controls sit alongside market operators’ anomalous order thresholds and extreme trade ranges, providing an important safeguard for the integrity and resilience of Australian markets.

The changes also align Australia’s rules more closely with the principles of the International Organization of Securities Commissions (IOSCO) and other international standards.

Greater consistency with global approaches supports confidence in Australian markets and makes regulatory requirements easier to navigate for entities operating across jurisdictions.

The amendments follow extensive industry consultation and will take effect in 2028. After considering feedback, ASIC extended the transition period to 18 months to give firms more time to implement the reforms while maintaining their market integrity objectives.

Ahead of the new rules commencing, ASIC is also consulting on updated regulatory guidance to assist industry with their transition.

ASIC is proposing to consolidate, simplify and clarify the relevant guidance, making requirements easier for securities and futures participants to interpret and apply.

The updates advance ASIC’s commitment to regulatory simplification by consolidating material, removing repetition, shortening guidance and improving its structure.

ASIC is seeking feedback on the proposed updated guidance in RG 265 and RG 266. Submissions close at 5pm (AEDT) on 5 November 2026. Further information, including the draft guidance, is available on the consultation webpage.

Digital asset businesses transition to licensing

ASIC is stepping up its oversight of digital asset businesses under the current law as they transition to licensing following the end of its no-action position on 30 September 2026.

The existing financial services law is broad and technology-neutral, and already applies to many digital assets. ASIC published updated guidance on how the current law applies to digital asset businesses in October 2025 (INFO 225).

The increased activity is helping businesses understand their current licensing obligations. It has led to more licence applications and prompted businesses to consider whether they need to update their licences or change the services they offer in Australia.

It is also giving ASIC a clearer view of issues across the sector, including regulatory perimeter assessments, governance and compliance capability, custody and safeguarding arrangements, as well as operational resilience.  

Businesses that provide financial services involving digital assets must hold the appropriate licence or authorisation, unless an exemption applies. Unlicensed businesses, or those who may not be covered by existing authorisations, should assess how the financial services laws apply and take steps to comply.

ASIC will continue to engage with businesses throughout the licensing process. For regulated firms, ASIC will clarify expectations and promote improved practices and support appropriate outcomes for consumers and markets.  

Where concerns arise, ASIC will consider an appropriate and proportionate regulatory response, based on circumstances, the seriousness of the conduct and the risk of harm.

Share sale fraud – strengthen your controls now

ASIC is calling on market intermediaries to urgently review and further strengthen, if necessary, their controls to protect against the ongoing threat of share sale fraud. As technologies such as frontier AI evolve rapidly, it is vital that market intermediaries act now to further embed strong cyber security and operational resilience foundations.

Since updating its guidance to protect against share sale fraud in 2025, ASIC has continued to identify instances of share sale fraud that may have been avoided had a market intermediary updated its controls. In some cases, compromised client accounts have been used to sell Australian-listed shares and quickly purchase overseas-listed shares.

Market intermediaries should design controls to deliver clear outcomes: detect account compromise early, prevent unauthorised trading, disrupt suspicious overseas share purchases and protect investor assets before losses occur.

ASIC may take regulatory action in circumstances where clients suffer harm because a market intermediary has not taken reasonable steps to comply with the law. 

Effective controls

Controls should assess the full risk picture, not individual events in isolation. Market intermediaries should identify combinations of indicators that may reveal share sale fraud, including:

  • suspected phishing or social engineering
  • unusual account access
  • recent changes to contact details
  • rapid sale of Australian holdings
  • use of proceeds to buy overseas shares
  • activity inconsistent with the client’s previous behaviour

Effective controls combine account, trading, payment and client-profile information quickly enough to support intervention. While one indicator may appear routine, several together may signal account takeover, coordinated activity or an attempt to move value offshore. Escalation should therefore reflect cumulative risk, even where no single threshold is met.

ASIC’s previous guidance

ASIC updated Information Sheet 237 Protecting against share sale fraud (INFO 237) in June 2025 after market intermediaries reported observing a seven-fold increase in the number of share sale fraud reports made by market intermediaries. At the time, ASIC reminded firms to verify client information carefully and consider their suspicious activity reporting obligations.

ASIC also published a case study showing how stolen investor information can be used to access registry and broking arrangements, transfer holdings, sell shares and divert proceeds through a fraudulent bank account.

The latest pattern—selling Australian holdings and then buying overseas shares—reinforces the need to verify client instructions, connect indicators of compromise and escalate suspicious activity before assets are lost.

Frontier AI awareness must turn to action

ASIC and APRA have urged financial market entities to move from gaining awareness of risks linked to frontier AI to taking decisive action.

Both APRA and ASIC warned publicly in recent months that frontier AI is increasing the speed, scale and sophistication of cyber threats to the financial system while also accelerating technology and operational risks.

Building on those messages, the regulators hosted nine roundtables in June and July involving more than 600 attendees from across the financial system.

They were supported by the Australian Signals Directorate (ASD) with participation from the Reserve Bank of Australia, Treasury and the Australian Competition and Consumer Commission, signalling a whole-of-government response.

Key themes to emerge included:

  • the importance of getting the cyber fundamentals right, including identifying and managing critical assets and systems, timely patching, strong identity and access controls, attack surface reduction, backup integrity, tested response and recovery arrangements, and third-party risk management
  • the need to consider key decisions such as risk appetite, escalation authority, recovery priorities and communication strategies at board level before a crisis hits, given that frontier AI compresses incident response timeframes
  • a growing interest in defensive AI, including for threat intelligence, vulnerability detection, code review and incident response, however it was also acknowledged that capability remains limited
  • common dependency and concentration risk associated with third-party service providers can turn isolated individual incidents into much broader sector-wide disruption, and
  • the importance of actively contributing to industry-led collaboration, including sector-wide threat intelligence sharing, dependency mapping, supplier assurance and sector incident coordination.

ASIC Commissioner Simone Constant urged boards and executives to ensure their organisations have well-tested response plans and to understand key vulnerabilities, so they can respond effectively under pressure.

You can read the information paper with more insights from the roundtables, as well as a preparedness checklist for boards and executives. 

Poorly monitored suspense and error accounts threaten market integrity

After observing some poorer practices, ASIC has commenced a review of suspense and error accounts, focused on examining licensees’ practices and identifying areas where controls can potentially be strengthened.

Suspense and error accounts serve legitimate operational purposes. However, inadequate controls can create opportunities for misconduct, including the concealment of losses, inappropriate trade allocation and other conduct that may undermine market integrity.

The surveillance aims to examine the various practices for these accounts across a range of market intermediaries and assess the adequacy of governance arrangements, operational controls and record-keeping practices. The surveillance also seeks to determine whether account usage is consistent with financial services laws.

After initial engagement with selected market intermediaries, ASIC's preliminary observations included numerous good practices such as restricted account access, prompt allocation with daily reconciliation and exception monitoring, and separation of staff trading from client activity and error processing as well as automated and frequent monitoring and early reconciliation.

ASIC also identified areas for improvement including unclear account purposes and allocation rules, manual or person-dependent controls, and limited segregation or independent oversight.

Over the coming months, ASIC will continue its enquiries, including analysis of controls, governance frameworks, policies and transaction data. It intends to share insights from the surveillance to inform and strengthen industry practices.

Keeping CFD safeguards in place

ASIC is seeking feedback on its proposal to extend and amend the consumer protection measures governing contracts for difference (CFDs), with the product intervention order (PIO) proposed to remain in place for a further 10 years.

The updates are designed to preserve protections that have materially reduced investor harm while modernising the PIO to ensure it treats products with the same economic characteristics and risks as CFDs consistently, whether they are settled in cash, by set-off or through the transfer of digital assets.

The CFD PIO commenced on 29 March 2021 and was extended by ASIC in April 2022 to 23 May 2027.

Data collected to support that extension shows substantial reductions in retail investor harm during the first six months of operation, including significant reductions in:

  • client losses: reduced 91%, from $372 million to $33 million aggregate net loss per quarter
  • margin close outs: decreased 87% per quarter
  • active retail accounts:  decreased 29%, from 504,905 to 357,841.

ASIC is inviting feedback from CFD issuers, industry bodies, consumer representatives and other stakeholders on the proposed extension and amendments to the PIO.

The proposed PIO would:

  • modernise the definition of CFDs to also include CFDs that are settled through the transfer of digital assets
  • clarify how initial margin requirements apply to CFDs over options
  • confirm that initial margin requirements must be applied separately to each CFD and cannot be reduced by netting opposing positions
  • clarify conditions applying to permitted discounts and educational or research tools, and
  • update terminology from ‘cryptoasset’ to ‘digital asset’.

ASIC is also seeking feedback on whether CFDs over options that expose retail clients to potential losses greater than the premium should continue to be available to retail investors.

Submissions close at 5pm (AEDT) on 9 November 2026. Details on responding can be found on CS 64 Protecting retail investors: Proposed extension and amendments to the CFD product intervention order.

Changes to OTC derivative transaction reporting

Reporting entities should prepare to implement upcoming changes to the ASIC Derivative Transaction Rules (Reporting) 2024 (the Rules) and commence reporting foreign exchange target redemption forward (FX TARF) transactions using the most appropriate unique product identifier (UPI).

ASIC has published its Summary of feedback to CS 48 and ASIC's response, together with the non-confidential submissions received, in response to CS 48 Proposed changes to the ASIC Derivative Transaction Rules (Reporting) 2024 (CS 48).

ASIC will proceed with most of the proposals made in CS 48. However, in response to concerns about implementation burden and international alignment, ASIC has modified some proposals and decided not to proceed with others.

Subject to the Minister’s consent, changes to the Rules will take effect approximately nine months after ASIC registers the amendment instrument, allowing industry time to implement the changes. ASIC expects to register the instrument in late 2026 or early 2027 and will provide further updates at that time.

For FX TARF transactions, ASIC is adopting recently published international regulatory guidance from the Committee on Derivative Identifiers and Data Elements of the Regulatory Oversight Committee. Reporting entities must:

  • begin reporting new FX TARF transactions using the most appropriate UPI template as soon as technologically practicable
  • complete implementation by 30 June 2027
  • monitor future guidance on additional TARF sub-types and the reporting of FX TARF attributes using critical data elements.

The FX TARF UPI template has been available through the Derivatives Service Bureau’s (DSB) UPI Service since 27 June 2026.

For further information, visit the Derivative transaction reporting webpage, read the ROC guidance on FX TARF reporting and visit the Derivatives Service Bureau website.

Promoting fair and effective wholesale markets

ASIC and the Financial Markets Standards Board (FMSB) have extended their cooperation for a further three years to promote global standards for fair and effective wholesale financial markets.

ASIC’s Consultation Agreement (Agreement) with FMSB will be extended until 25 September 2029.

The Agreement enables ASIC’s and the FMSB’s strong shared interest in maintaining, and where appropriate improving, best practice industry standards and operational practices among market intermediaries in Australia.

The Agreement’s extension also reinforces ASIC’s active interest in the development of global industry standards and will further facilitate FMSB’s consultation with ASIC on shaping draft standards, guidance materials and other publications.

ASIC’s participation does not constitute implicit or explicit endorsement of FMSB’s publications, and industry standards do not replace obligations under Australian law.

For more information, read the Consultation Agreement and letter regarding the extension.

Enforcement outcomes

Recent enforcement outcomes highlight ASIC's focus on holding individuals and companies to account for conduct that threatens market integrity, including insider trading and failures to properly disclose market-sensitive information

On 25 September, Richard Evans, the former chief executive officer of the once high-performing ASX-listed technology company Big Un Limited (Big Un), was convicted and sentenced to one year and nine months’ imprisonment for communicating inside information about a funding arrangement to another person. He will serve by way of an intensive Correction Order (ICO) with 400 hours of community service.

He was also automatically disqualified from managing corporations for five years.

In August, health, beauty and wellness company McPherson’s Limited (McPherson’s) was found by the Federal Court to have breached continuous disclosure laws and engaged in misleading or deceptive conduct in connection with its profit forecast in October 2020. Its former CEO and Managing Director, Laurence McAllister, was also found to have breached his directors’ duties and to have authorised McPherson’s provision of false or misleading information to the ASX. McPherson’s Limited and Mr McAllister have sought leave to appeal the judgment.

On 20 October, former Regional Express Holdings Limited (Rex) chief executive officer and executive chair Lim Kim Hai was disqualified from managing corporations for four years and ordered to pay $800,000 after he admitted to his involvement in Rex’s continuous disclosure breaches and to breaching his director’s duties.  

More information about ASIC’s markets enforcement outcomes since the last update are available below:

  • Former Big Un CEO Richard Evans sentenced for communicating inside information (26-230MR)
  • McPherson’s liable for continuous disclosure failure and misleading investors, former CEO breached directors’ duties (26-194MR)
  • Former Rex director Lim Kim Hai disqualified for 4 years and ordered to pay $800,000 penalty for directors’ duties and continuous disclosure contraventions. (26-250MR)