Check against delivery

Good afternoon to you all. Thank you, Shona [Martyn, CEO, Walkley Foundation]. It’s very good to be here. 

Acknowledgement of Country

Let me begin by acknowledging the Gadigal people of the Eora nation as the Traditional Owners of the lands on which we’re meeting and pay respects to Elders past and present.

And let me also congratulate each of the Walkley Business Journalism Award finalists.

The work recognised by these awards demonstrates the continuing importance of serious business journalism. That is journalism that uncovers misconduct, explains complex markets, and traces the consequences of decisions made by companies, governments and regulators for investors and consumers and, of course, for the wider community.

Introduction

Now, in introduction, the ASIC media team, a few of them are here today, but the rest of the team has asked me to send you their regards. 

They’re having an unusually quiet afternoon as many of their most persistent callers are all here with me in this room.  

And there are many familiar faces here. Some of you have followed ASIC’s work closely and reported on it critically. Often, you have done both, as of course you should.

Regulators and journalists perform distinct functions and we’re accountable in different ways. Journalists are not here to accept ASIC’s account without question, and we should never expect that of you.

Our roles are different, but both depend on misconduct being exposed and institutions being held to account.

That role, or the importance of that role, is becoming ever more so as the information environment grows more complex. Scammers can appropriate the language, appearance and authority of financial journalism to promote their predatory schemes and to give false claims a veneer of credibility. 

In that environment, rigorous and independent reporting is essential. ASIC’s work to protect consumers and investors, and to maintain confidence in our markets is strengthened when the public has access to expert voices and information that it can trust. 

ASIC's work and our responsibilities attract significant media attention, and we see that as a positive. Journalists are deeply connected to their audiences, and financial misconduct, consumer harm and market integrity matter to all Australians.

The reach of regulatory action

As a conduct regulator, ASIC uses its powers to change behaviour, prevent and address harm, and promote confidence in the financial system. And we do that through our supervision, surveillance, guidance and enforcement work, including of course court action, where that’s necessary.

The significance of regulatory action should extend beyond the conduct or firm that is the focus of that action. For a broader effect to be realised, the lessons need to be understood. This means communication is not incidental to regulation; it contributes to deterrence and it helps the public understand both the conduct and its consequences.

A court outcome against one firm may cause an entire sector to reassess its practices, and a report that identifies systemic failure can help consumers recognise that they have been affected and to consider the actions that they take in response.

Independent and objective reporting substantially increases the reach and impact of our work in a way that an ASIC media release, on its own, can’t.

Consider our recent report into mortgage offset accounts. 

ASIC’s own channels can reach an important but relatively limited audience. It was the media reporting that took those findings to a much wider group of customers and market participants.

And more importantly, good reporting goes beyond just reproducing our findings. It tests them, it places the technical issues in their proper context, and it considers the implications and helps customers to ask better-informed questions of their financial institutions.

When ASIC takes action, coverage of that action ensures that the consequences are understood well beyond the firm involved. Directors, executives, and legal and compliance professionals across the market see the conduct at issue and the standards that the law requires. And that broader awareness in itself has a significant deterrent effect.

Holding us to account

But of course, that relationship doesn’t only operate in the one direction. Independent journalism also subjects ASIC’s decisions and our performance to scrutiny.

I must admit there are mornings when the business pages read less like news and much more like a forecast for how my day is about to unfold.  

We won’t agree with every criticism made of us. But you should expect us to engage with the substance of your criticism, correct the record where necessary, and explain our decisions to the fullest extent consistent with the law and the integrity of our processes. 

We recognise the frustration when a legitimate question receives a response that does not address the substance of what you’ve asked us. There are matters where the law, or the status of an investigation, limit what we can say. 

These are important constraints. They protect due process; they protect the rights of those involved and the integrity of our investigations. But they shouldn’t, however, prevent us from being as informative and as responsive as the circumstances permit.

The flow of information isn’t one way. Journalistic inquiry, including the questions that you put to us and the matters that you bring into the public domain through reporting, can provide information that is highly relevant to our work.

Many of you have deep expertise in the sectors that you cover and extensive networks across markets and institutions. It’s not at all surprising that journalists may identify an emerging risk or pattern of conduct before it becomes apparent through our regulatory channels. When that occurs, as it should, ASIC pays attention. 

Regulatory action, though, requires more than allegation. We must test the information against the available evidence before we can decide whether the matter engages our powers. But information brought to us by journalists may well identify an emerging problem, corroborate intelligence we already have or warrant closer regulatory examination. And we absolutely recognise that rigorous journalism does uncover facts and conduct that are relevant to our work and the public interest.

Issues ahead

So, turning to the issues ahead for ASIC. 

Many of the matters that are receiving close journalistic attention are also occupying the Commission. I’m going to talk briefly about three: private credit, audit quality and artificial intelligence.

Private credit

Private credit has an important role in our financial system. It broadens the finance available to businesses and it provides additional opportunities for investors. 

Private credit plays that role sustainably, though, when firms are well governed and investors understand the risks.

As the sector grows, failures of governance or transparency have the potential to affect an increasing number of investors, including those Australians that hold exposure indirectly through their superannuation.

And I think it is fair to say, that we are now seeing signs of some stress in some parts of that sector.

The stress is not uniform through the sector, but recent events have exposed weaknesses in governance, transparency, valuation practices, and conflict management in some parts of the market.

Many of you have reported on the recent events involving the Bathla Group. 

In terms of ASIC’s role in that regard, we are working closely with the administrators to try to trace the $3.4 billion in funds that have been loaned to Bathla through extraordinarily complex structures, spanning more than 500 companies and more than 40 lenders. And our focus is really trying to ascertain the extent to which there are retail investors affected. 

We also have an active surveillance under way in relation to private credit and it is one of our enforcement priorities. 

Just to emphasise, though, it is not our position that we need to replicate the regulatory settings of public markets for private markets. What we are concerned to ensure is that investor protections are effective, disclosure is reliable and that those trusted with other people’s money are properly accountable.

Audit quality

Turning to audit. 

I think it goes without saying that a well-functioning market depends on investors having confidence in the information that companies publish and in the auditors responsible for testing it. And journalists and regulators rely on the integrity of that information too.

Auditors have a critical gatekeeper role. Their access to corporate information enables them to test what companies report, and the market relies on them to do their work rigorously and independently.

Recent failures within the auditing profession reinforce, in our view, both the need for closer scrutiny and the case for reform.

You’ll no doubt be aware that we have commenced a surveillance of the big four audit firms, including issues raised through internal complaints and by whistleblowers. 

We also have underway multiple lines of inquiry in relation to the KPMG allegations. And we’ll have more to say about those when we are able to.

The current framework, though, is directed largely at individual auditors and individual audit engagements. It doesn’t equip us to address poor practices at the firm level. What that means is that much of the conduct, or at least some of it, now being alleged is likely to fall outside our remit.

Because of this, we have been advocating for law reform in this area to give us broader powers to oversee the audit firms. We are engaging with Treasury on these issues. Treasury is in the middle of a consultation on policy responses and we will of course consider the outcomes of that work.

Artificial intelligence

Turning then to artificial intelligence. 

It won’t surprise you this is one of our focuses going forward. Artificial intelligence is already reshaping operations across financial services and markets. Its capacity to improve efficiency and improve risk detection is significant, but without adequate governance, we are concerned it may expose consumers and our markets to new forms of harm.

Our position on AI is straightforward: firms remain fully accountable for meeting their obligations, regardless of the technology that they use. 

In the coming year, we will be examining more closely how AI is being used across the financial system and what that means for consumers, investors and markets.

We’re also going to look closely at how the banks are deploying AI in customer-facing services and in their decision-making that affects customers. We will also examine the potential for AI to facilitate market manipulation, including through deepfakes and misinformation. This will draw on social-media monitoring and market analysis.

Greater reliance on automated systems increases the consequences of weak operational and cyber controls. In response to these changes, we’ve recently updated our market integrity rules to modernise the obligations to reflect current trading practices, technology and risks including algorithmic trading.

Firms who are deploying AI must ensure their systems are secure, resilient and subject to effective human oversight.

The message is that while the technology may be new, the law has not changed – and responsibility remains with the firms deploying it.

Conclusion 

To conclude, we understand that journalists will continue to be interested in what we do, that you will test our decisions and, at times, bring to us matters before they have come to us through reporting, monitoring, or other regulatory channels. 

At the same time, we need to continue to respect and protect the confidentiality of investigations and the integrity of our court proceedings.

We understand that means the relationship will not always be comfortable. And nor should it be. 

But in my role as ASIC Chair, I believe that our obligations can coexist with us being a more open and responsive regulator. Where we can answer, we should do so directly and in a timely way. Where we can’t answer, we should let you know why and provide the context for what can properly be disclosed.

You won’t always be satisfied with our answers, and no doubt we won’t always agree with your reporting. But we recognise we must be prepared to fully justify our decisions and remain accountable for exercising our powers.

That is the standard to which we should be held.

Thank you again, most sincerely, for the critical role you play in the public discussion and to improve the understanding of critical business, financial and economic issues. 

 I now look forward to taking your questions.