ASIC reveals priorities: Corporate regulator lists small business concerns as area of focus
Wednesday, October 3, 2018/
Corporate regulator ASIC has published a report on its areas of focus for the next four years, naming small business as one of its chief concerns.
Released on Tuesday, the corporate plan comes less than a week after ASIC was criticised for a soft-touch approach towards banks in the banking royal commission’s interim report.
ASIC commissioner John Price said in a statement ASIC will focus on poor culture and professionalism in financial services and credit, including the fair treatment of small business.
“It’s vital that ASIC helps create an environment that develops the small business sector,” he said.
The 40-page plan sets out ASIC’s priorities through to 2022 and delivers updates on areas of focus, including its Small Business Strategy, which was launched in August last year.
Here are some of ASIC’s focus areas for 2018-19.
Poor culture and incentives which can harm markets
Following revelations that have come to light in the banking royal commission, the regulator has identified the fair treatment of small business by banks as an area of focus.
ASIC will play a key role in the relationship between small businesses and banks in the coming years as the regulator overseeing a new code of banking conduct will cover commercial lending.
Australian Small Business and Family Enterprise Ombudsman Kate Carnell told SmartCompany earlier this week ASIC will need to “step up” and ensure businesses aren’t exploited by the “aggressive behaviour” of banks.
The regulator also said it will be honing in on corporate governance, disclosure and the quality of financial reporting, amid growing concern about illegal phoenix activity.
Phoenixing, a practice whereby a director transfers out the assets of a company before letting it liquidate and then trades those assets under a new business, is estimated to cost the economy more than a billion dollars annually.
The regulator is likely to be a key regulator in new reforms will force company directors to register for a new identification program designed to track them beyond individual companies.
Unfair contract terms
Since legislation to curb unfair contract terms was introduced in 2016 lenders large and small have been prompted to change their agreements with small businesses.
ASIC said on Tuesday it is reviewing compliance with unfair contract terms legislation outside of the big four banks and will consider further reforms.
Small business lender Prospa has emerged as a recent case of ASIC’s eagle eye on lending in recent months, having been forced to stall its plans to float on the ASX after the corporate regulator took a look at its contracts, prompting changes.
Carnell has expressed concern, however, that more needs to be done to prevent small businesses from being ripped off by unfair contract terms.
The ACCC complained last month that while it is able to challenge unfair contract terms in court, it is not able to disincentivise lenders with financial penalties for non-compliance.
ASIC said it will continue to closely monitor threats from “emerging products”, namely initial-coin offerings (ICOs) and cryptocurrencies, as well as the use of consumer data by business.
ICOs are a fundraising mechanism whereby a company distributes its own cryptocurrency in exchange for investment. SmartCompany has an explainer on ICOs if you’re interested in knowing more.
The regulator hasn’t shied away from taking action against Australian companies pursuing ICOs in recent months, expressing concern about misleading and deceptive conduct.
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