ASIC's powers are 'impaired'. Photo: Jim Rice
THE corporate watchdog needs more funding to properly supervise financial advisers and markets, catch criminals and prevent market meltdowns, according to the International Monetary Fund.
It said the Australian Securities and Investments Commission was also at risk of becoming isolated from foreign counterparts unless the government amended laws so it could share data more easily.
The government has called the IMF's assessment ''tough, but fair'', but did not promise more funding. It dismissed concerns that the minister responsible for the regulator, parliamentary secretary to the Treasurer Bernie Ripoll, can interfere with ASIC.
''The minister's power to issue a direction to ASIC … is limited and has only been exercised once and then some 20 years ago,'' the official response said.
The review found Australia's financial regulators had a ''high level of compliance'' with international rules and had improved their reputation through successful high-profile prosecutions. But ASIC needed to maintain its focus on systemic risks and watch for new risks from areas ''that have traditionally been considered of low risk''.
''ASIC's operations independence and sufficiency of resources are overarching concerns which impair its ability to discharge its supervisory functions adequately and effectively across the entire regulated population,'' the review said.
ASIC's funding temporarily increased by $100 million to $361 million after the global financial crisis, but has since declined to $353 million.
The review looked at ASIC's implementation of regulations and principles written by the International Organisation of Securities Commissions.
ASIC has improved since its last review six years ago and the introduction of a new exchange - Chi-X - has been a catalyst for positive change.
The call for more funding echoes comments by ASIC chairman Greg Medcraft to a joint parliamentary committee on corporations and financial services in September that the government ''gets what it pays for'' from ASIC.
He warned that about 95 per cent of Australia's financial advisers were never surveyed due to a lack of resources. ''I guess the warning we have to Australians is, frankly, what we have is a system that is based on self-execution and relies on people to do the right thing,'' he said.