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The role of the new company will be to:
- Review the policies and procedures of areas in ASX which have supervisory functions. This would include a review of the level of funding and resources for supervisory functions.
- Provide reports and express opinions to the ASX board on whether appropriate standards are being met and whether the level of funding and resources for supervisory activities are sufficient.
- As a result of these activities, to provide assurance that the ASX Group adequately complies with its ongoing responsibilities as a market and clearing house operator; that it is conducting its supervisory activities ethically and responsibly and is maintaining appropriate controls preventing employee conflict of interest.
- Oversee the supervision of listed entitles with special identified conflicts. This will provide a further safeguard against possible concerns that ASX may give advantages to listed entitles that are partners or impose disadvantages on listed entitles that are competitors. The oversight function will involve consultation on each supervisory decision concerning the exercise of discretion.
The Board of ASX Supervisory Review will be comprised of a majority of non-executive, independent persons with complementary skills. Individual appointees will be chosen from a panel nominated by ASX. ASIC will have a power to veto any particular panellist and proposed appointees will be notified to the Minister prior to their appointment. The first Chairman of the new company will be Mr David Hoare, an experienced Australian company director.
Mr Richard Humphry, ASX's Managing Director, said that supervision of listed companies' and brokers' contractual obligations to ASX is a core business of ASX. The function of supervision, apart from being a responsibility of ASX under the Corporations Law, enhances ASX's reputation and brand and is integral to the confidence of investors and the efficiency and value of ASX's market.
"Our supervisory activities take many forms and permeate all aspects of the trading and settlement platforms and services we provide. Understanding our market functions, market participants and listed entitles, is the key to successful and effective market supervision," he said.
"We believe that separating the supervisory function or accountability for it is not a suitable option for Australia's capital markets. Within a framework of ASX responsibility for the integrity and efficiency of ASX markets, a separate review body within the ASX Group, backed by an independent review by ASIC, makes sense.
ASX also indicated its support for the Government's proposal to amend the Corporations Law to give ASIC the power to audit market operators as to ongoing compliance with their obligations. The purpose of such an audit would be to provide an external review and assurance that market operators, continue to meet their obligations under the Corporations Law.
"Exchanges and regulators around the world are grappling with this issue as they look at demutualising. As yet there is no one universally accepted model.
"This corporate governance structure and the overall scheme of transparency and accountability within which ASX conducts its supervisory activities, will place Australia at the leading edge in terms of accountability for supervisory activities undertaken within a co- regulatory framework," Richard Humphry added.
"We believe the model chosen is a robust one. However, we recognise the dynamic nature of the global marketplace. ASX will continually review the arrangements it has in place to ensure that they continue to best promote and safeguard our reputation for integrity, efficiency and transparency.
"In view of the increasing globalisation of our marketplace, we will continue to monitor international developments in corporate governance, particularly as they impact on those financial product and service providers entrusted with supervisory responsibilities and assess whether the model we have chosen will also best equip
