Published on the 02/09/2014 | Written by Beverley Head
The Australian Securities and Investment Commission has called for the bar to be raised in terms of regulation of technology vendors selling to the financial sector…
In its second submission to Australia’s Financial System inquiry ASIC has called for greater regulatory scrutiny of technology companies selling to financial service businesses including banks, insurance companies and stockbrokers. It wants technology vendors “of sufficient scale” to be required to secure an Australian Financial Services licence before being allowed to sell technology to the banks.
Noting the heavy reliance that the financial sector – and the market more generally – places on technology ASIC claims that any outage or malfunction could impact the Australian financial markets.
“There is however limited regulatory visibility and oversight of technology service providers of sufficient scale in Australia. The law places the onus on the licensees to ensure that the technology is appropriate for its operations.”
ASIC proposes that: “Certain areas of Australia’s financial system should be subject to greater regulatory scrutiny. There should be a regulatory model to oversee technology service providers of sufficient scale, including AFS licence requirements.”
Instead of trusting the organisations buying the technology to perform requisite due diligence ASIC wants greater regulation of technology vendors, and seems quite hopeful it might take on the role of technology policeman. Its submission notes that ASIC could tailor obligations in the AFS licence to suit the unique services provided by technology companies.
“Such conditions could include mandatory business continuity and minimum IT infrastructure requirements,” according to the submission.
However there has been some pushback against the suggestion. Westpac, in its second submission to the inquiry, notes that it can source goods and services from up to 10,000 suppliers – and that any attempt to regulate technology vendors could drive up costs and stifle innovation. It does not want additional regulatory burdens placed on technology vendors.
At time of writing however there has been little public reaction from the technology sector itself. So, while the bank has stood up for the technology sector status quo, there is no published submission to the inquiry from the Australian Information Industry Association, the technology sector’s peak body, nor from any of the large technology vendors which could have their wings clipped if ASIC’s recommendations are embraced.
