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If you blinked you may have missed it. Greg Medcraft, the Chairman of the Australian Securities and Investments Commission (ASIC), recently addressed the Australian institute of Company Directors giving a speech titled ‘What ASIC Expects of Directors’.
Whilst Mr Medcraft addressed the topic of director duties in the context of viewing directors as ‘gatekeepers’ of the financial system his comments have broad application to all company directors.
Notably, on the issue of compliance, Mr Medcraft noted that directors should ensure that their companies have a strong compliance function that drives a culture of compliance.
Tellingly, Mr Medcraft stated that ‘if we find that a company’s culture [of compliance] is lacking, it is a red flag that there may be broader regulatory problems… This means we are more likely to investigate and gather intelligence on that organisation’.
So, what does this mean? Most of what Mr Medcraft had to say is not new. One of the roles of ASIC is to police directors and ensure that they are doing their duty on behalf of their company, and its shareholders and investors.
Prioritising compliance and corporate governance is a means of ensuring market and investor confidence and Mr Medcraft talked about corporate governance as being the subject of renewed ‘global focus’ in the aftermath of the Global Financial Crisis.
On the broader issue of governance, Mr Medcraft stated that good governance should ‘ensure that risks are understood, managed and, where appropriate, communicated’. He emphasised that risk management is now – like work health and safety practices – an accepted and basic part of running a business.
The bottom line is that ASIC is sending a message to directors that they have a duty not only to ensure the viable functioning of a business, but also to ensure that a culture of regulatory compliance, risk management and proper corporate governance exists and is enforced in their organisation.
Whilst the recent cuts to ASIC’s budget may lead some directors to think that ASIC will be less focused on enforcement it was interesting to hear Mr Medcraft highlight the fact that ASIC sees the rise of class action litigation as a positive trend which supports regulatory enforcement and is likely to bridge any gaps. In other words – if ASIC doesn’t get you, the class action lawyers will.
Does your company provide its board with regular, and most importantly meaningful, risk management and compliance reports? Do you have a positive compliance culture? Do your staff receive regular compliance training?
How can CompliSpace help?
CompliSpace has been working with ASX listed entities for over 10 years, assisting them to develop risk and internal control systems that allow them to meet their compliance obligations and most importantly to obtain real value from their investment in robust governance, risk and compliance infrastructure.
P: 1300 132 090
This blog is a guide to keep readers updated with the latest information. It is not intended as legal advice or as advice that should be relied on by readers. The information contained in this blog may have been updated since its posting, or it may not apply in all circumstances. If you require specific or legal advice, please contact us on 1300 132 090 and we will be happy to assist.
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