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Australian Financial Regulation

Read the attached article about the 2008 financial crisis and calls for better regulation in "Leaders: What next?"

The article refers to corporate and regulatory failure. It poses the proposition that better regulation is needed but it must be the right regulation. Further, it suggests that too much regulation may inhibit the market and make it less effective.

Consider whether there is a need for any reform of the law relating to the supervision of financial services in Australia and whether too much reliance on regulation is naive?
By following this guideline you will be successful in this task:

Use relevant legal principles, case law and legislation and their application to provide an answer to the problem. Present arguments in a clear, concise and logical manner and that conclusions shall be reached.

Have excellent, concise understanding of the key regulatory issues and laws

Have excellent research that is thoughtfully and logically integrated within the essay. Extensive use of a range of resources.

Demonstrate an excellent understanding and analysis of key policy issues and provided comprehensive and sophisticated critical insights

Have an excellent conclusion which clearly and succinctly explained the chosen outcome

Have an argument that is consistently clear and the essay is well-structured

I have only assigned this task to you and also attached a 'Helpful links' document as well as 3 other documents to assist you.

Thank you, Deepshikha.

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Solution Preview

Corporate and Regulatory Failure

Overview of Australian Regulatory Structure

• "Financial regulation conforms to a twin peaks approach, i.e. one regulator oversees prudential regulation while other oversees conduct-of-business regulation

• The Australian Prudential Regulatory Authority (APRA) is responsible for prudential regulation while the Australian Securities and Investment Commission (ASIC) oversees conduct-of-business regulation

• A cross-agency commission seeks to resolve conflicts of overlap and facilitate communication between the two agencies" (Fresh & Baily, 2009).

Under the APRA umbrella are deposit institutions, insurance companies and retirement funds. It function is to supervise and promote stability, efficiency and competitiveness in financial markets. The APRA performs its functions by managing risks in financial services firms through different means like capital adequacy requirements.

Under the ASIC umbrella are market and financial services providers. ASIC is a corporate regulator and can impose civil or criminal charges against firms. It oversees different activities of financial services firms like capital raising, takeovers, reporting, etc. In addition, ASIC also provides licensing and monitoring of financial services firms. In an attempt to protect consumers, ASIC guides them against deceptive and misleading financial products.

Australian Investor Market

Over last couple of years, the retail investor market of Australia has extended radically. There are two main reasons for this phenomenon. First, government has favored privatization over some time and second individuals have to make their own provision for needs like education and retirement, which was earlier provided by government. In addition, there has also been an increase in disposable income which out of fashion has led to increase in investment behavior of people. To cater the needs of expanded market, new financial instruments came up and so did different modes for transacting.

In Australia, the largest factor contributing to stupendous growth in retail market has been introduction of compulsory superannuation contribution for all employees. This implied that millions of employed workforce, with their contributions to superannuation fund had interest in shares held by their fund. Such workforce had never been investors before. In addition, workforce that retired got a lump sum benefit ...

Solution Summary

Australian regulatory environment is examined. The reliance on regulation for navies are given.