In a clear message to the market, ASIC has added its voice to calls for better monitoring of business communication. Advice in Information Sheet 283 is a response, the regulator says, to “concerns that the use of unmonitored communication channels and encrypted communication applications in business communications can significantly increase the risk of misconduct going undetected.”

It goes on to say that “[r]apidly evolving technologies, use of personal devices and wider adoption of remote or hybrid working arrangements present challenges for monitoring and recordkeeping for licensees,” an issue we have covered in depth. Our full list of actions brought by the SEC, CFTC and the UK’s Ofgem is updated regularly, but this is the first time ASIC has picked up on the issue.

Rob Mason, Director of Regulatory Intelligence at Global Relay, said: “This is likely to be in response to similar concerns they have observed to those the SEC have sanctioned. This is clearly a message to regulated participants regarding Whatsapp (it mentions encrypted messaging app from personal device) and other usage including ecomms and voice.”

“Rapidly evolving technologies, use of personal devices and wider adoption of remote or hybrid working arrangements present challenges for monitoring and recordkeeping for licensees.”

Simone Constant, ASIC Commissioner

ASIC Commissioner Simone Constant said: ‘Bankers, dealers and market participants have important roles as gatekeepers to Australia’s financial markets and stewards of market integrity. We expect them to maintain strong and effective supervisory arrangements to manage the risk of harm to clients and to market integrity.

“Misconduct, such as the misuse of confidential or inside information, market abuse, insider trading, market manipulation, bribery and fraud, hurt Australian investors by damaging their confidence and wiping value from their investments.

“Rapidly evolving technologies, use of personal devices and wider adoption of remote or hybrid working arrangements present challenges for monitoring and recordkeeping for licensees. We expect market intermediaries to periodically review their arrangements for supervision of business communications so they are working effectively, and are appropriate for the nature, scale, and complexity of their business. With almost every working or retired Australian having a share in Australian markets, market integrity is a duty owed to every Australian.”

Appropriate supervision

The sheet provides practical guidance for market intermediaries on “appropriate supervision of their representatives’ business communications to prevent, detect and address misconduct and contraventions of financial services laws.” The guidance is split into four sections;

• why supervising representatives is important;
• how to manage risks from unmonitored business communications;
• what supervisory arrangements to adopt to monitor business communications;
• how to review the effectiveness of arrangements.

The advice makes clear that ASIC considers business communication “to include any written, voice or electronic communications used by market intermediaries and their representatives to carry on their financial services business. This includes, but is not limited to, communications reasonably required to meet record-keeping obligations and enable monitoring of compliance with financial services laws.”

The advice highlights:

• policies and procedures;
• ongoing training;
• consequence management frameworks;
• supervisory arrangements for monitoring comms; and
• process for regular independent review and testing.

It also includes a number of illustrative example scenarios to help those seeking to comply with their obligations under the Corporations Act 2001.