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#1 16-02-2020 17:39:01

johnedward
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Pepperstone: "ASIC powers will slow down innovation in Australia"

Pepperstone: "ASIC powers will slow down innovation in Australia"


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At the end of last month, Thomas Szabo, CEO of Pepperstone, spoke to the Australian Government's Special Committee on Financial Technology and Regulatory Technology.

The broker's CEO questioned ASIC's intended use of its product intervention powers - which includes the the imposition of strict leverage restrictions for the trading of contracts for difference (CFD) - intended to be in the best interest of the industry.

Speaking to the Committee, Szabo stressed that Australia is an attractive destination for innovation, given that it has mainly adopted a principles-based approach to the regulation of financial services. However, regulation is now moving away from this approach to adopt a more prescriptive approach, since regulators are less committed to the sector and would rather use regulatory tools when it has concerns.

"The Royal Banking Commission has had far-reaching effects on the financial services sector, extending beyond just the big banks," Szabo told the committee.

"This has created a change in the environment where collaboration between the industry and regulators has diminished and created a new environment mediated by lawyers and litigants, the next headline being considered a victory. The damage to the reputation of companies and industries that use this approach is profound, also creating negative public perceptions."

"ASIC should learn from the FCA's approach"

When asked by the Committee how Australia could learn from other regulators, such as the UK, Mr. Szabo says "... the UK's FCA has implemented a few rules on the types of products we offer - moving away from the principles-based approach which, in my opinion, is a better approach - and there is evidence to suggest that some of the changes they have made simply haven't worked."

"When you limit a product that is available online, traders tend to look for that product elsewhere. There has been a large exodus of investors to brokers located abroad where the products are readily available."

"This poses a number of problems. One of them is that it obviously affects local taxes and employment. Our industry employs several hundreds in Australia, as I mentioned, but it also pays around half a billion AUD in tax revenue, so that's important to Australia, and when trading products are scarce, traders can get them elsewhere fairly easily, and it costhis hurts our economy and job market. This is worth mentioning, regulators force traders to take their business to jurisdictions that are not as well regulated as in Australia."

"I'm not suggesting it's a mess, but you have to strike a careful balance. You can restrict something here - and it will just show up there, and there's no protection. It puts Australian traders at risk. I don't think this balance is recognised by some regulators. But what's going on is pretty obvious to us."
Powers are designed to be a final resort

The CEO of Pepperstone also says that ASIC's use of intervention measures goes against the recommendations of the Financial Systems Survey (FSI).

When intervention measures on products were first considered by the FSI in 2014, the authority declared that the measures should only be used as a last resort. In addition, the FSI says: "If power is used effectively, it should not affect innovation significantly".

However, the CEO of Pepperstone suggests that there is evidence that ASIC has not met these requirements since it inherited its product intervention powers.

"... I don't really think ASIC has encountered these obstacles, to be honest... So, rather than blaming an industry as being bad or otherwise, they should point the finger at players who don't behave. I don't think it's working like it used to be, and it creates real negative perceptions about industries such as ours."

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