The Australian Securities and Investment Commission (ASIC) has put forward proposals to strengthen the regulation of the debenture sector.
Among the proposals is a move to introduce minimum capital and liquidity requirements.
Commissioner, John Price said the move followed a number of high-profile collapses in the sector.
Mr Price said ASIC would also consult on proposals to strengthen disclosure to investors about debenture issuers and clarify the powers and duties of debenture trustees and the role of auditors.
He said ASIC had made it clear the existing conduct and disclosure regime had been pushed to its limit.
Bid to strengthen market
“Debenture issuers who accepted retail investments and then on-lend that money like a bank should be required to have a more sustainable financial position,” Mr Price said.
“This is consistent with growing international interest in regulating ‘shadow banking’ more effectively.
“We also consider debenture trustees may need greater powers so they can perform their supervisory role more effectively right across the debenture industry.”
Minister for Financial Services and Superannuation, Bill Shorten welcomed ASIC’s release of its consultation paper Debentures: Reform to Strengthen Regulation, saying it was the first step in implementing the Government's roadmap for strengthening the regulation of finance companies that issue debentures to retail investors.
“I strongly encourage stakeholders in the debentures sector to engage in ASIC's consultation process,” he said.
“These consultations will allow the Government and ASIC to assess the impact of the proposals on industry, including transitional arrangements, before making a final decision on the most appropriate future regulatory framework for the industry,” Mr Shorten said.
The consultation paper can be accessed at this PS News link and submissions close 28 March.