The Financial Services Reform Act (FSRA) became law on 27 September 2001, but the commencement date for most of the provisions of FSR was 11 March 2002. From that date, a 2 year transitional arrangement applied to the important licensing requirements.

The transitional period ended on 10 March 2004 so that from 11 March 2004, anyone who
conducted a financial services business or operated a financial market needed to be appropriately licensed under the FSR laws.

ASIC set up a taskforce to supervise the transition including the assessment of licence applications. Potential licensees were urged not to delay lodging their applications.

ASIC received Budget funding of $63 million over the years 2001–02 to 2005–06. This included funds for licensing and for granting relief from licensing, for surveillance and enforcement, and for the development of industry guidance.

How effective and efficient was ASIC’s implementation of Australian financial services licences?

The Australian National Audit Office has released its Audit Report, ASIC’s Implementation of Financial Services Licences(pdf). The audit examined ASIC’s planning for the introduction of financial services licences; the roles of the Department of the Treasury and ASIC in defining the effective scope of licensing; ASIC’s assessment and processing of licence applications; and ASIC’s supervision of licensees.

By the transition deadline of 10 March 2004, ASIC had issued 3738 financial services licences. By 30 June 2004, this had risen to 3853 financial services licences. The number of licences had risen to 4135 by 30 June 2005.

Over the transition period, ASIC granted 953 licences after a full assessment process, granted another 909 licences under a limited licence assessment process, and streamlined 1 875 old licences into new licences.

Two-thirds of all the licences granted during the two year transition period were granted during the last six months. According to ANAO, ASIC successfully dealt with the late influx, and the "generally poor standard of applications", by reallocating resources from other activities, such as the surveillance of licensees (so that surveillance staff could be available to achieve licensing targets), and by curtailing analysts’ scrutiny of applications (to reduce processing time).

However ANAO concluded that ASIC’s licence systems did not properly record critical elements of its licence decisions, such as ASIC’s assessment of the applicant’s character or its assessment of the applicant’s evidence that they could meet their licence obligations. Overall, important regulatory risks were not systematically addressed until after the end of the transition period.

ANAO estimates that ASIC’s processing of relief applications consumed four times the resources initially anticipated. In this context, ASIC advised ANAO in September 2005 that, while it significantly over-estimated the number of relief applications, it also significantly under-estimated the complexity of the applications for relief that were sought.

According to the report, ASIC has been unable to reach its surveillance targets due, in part, to the low initial take-up of financial services licences. ASIC’s records show 1 596 surveillances of financial services licensees since mid-2002 (when the first licences were issued) until June 2005, representing 54 per cent of its target to that date. The late transition of existing licensees significantly curtailed surveillance, reducing the population subject to surveillance and diverting surveillance resources to licence processing. In December 2005, ASIC advised ANAO that it expects to undertake approximately 1 200 surveillance activities in relation to financial services licensees in the 2005–06 financial year.

ANAO has made seven recommendations, six to ASIC alone. Of these, three are aimed at improving the documentation of ASIC’s licence processing, the useability of its public licensee database and the reporting of ASIC’s compliance performance. The remainder focus on improving ASIC’s processes for identifying and managing regulatory risks.

Treasury and ASIC are the joint respondents to the remaining recommendation, that they consider the benefits of making licence applicants’ certifications more enforceable than at present.

ASIC agreed with the recommendations and advised the ANAO that it had implemented the recommendations relating to it and was restructuring its activities.

Allianz Australia Insurance, Australia has been named by internet design expert Jakob Nielsen as having one of the 10 best designed corporate intranets of 2006.

Whilst I have not seen the intranet, I suspect that Allianz has developed it at least partly for compliance and productivity reasons.

Nielsen says that a "trend this year was an increased use of training areas on intranets. The best designs often locate traditional training options and e-learning in one area. After all, from a user’s perspective, what’s important is learning — regardless of whether it takes place online or in a classroom. Many intranets also offer special training areas to help new employees learn about their new companies…

Enhancing e-learning user interface controls in this manner is important: people often feel disoriented or frustrated when tutorials take over their screens and don’t allow them the freedoms normally inherent in the Web (and intranet) user experiences."

As far as ROI is concerned, Nielsen notes that IBM’s "BluePages alone is estimated to save IBM $194 million per year. Of course, smaller companies wouldn’t realize quite such large savings, but it’s certainly realistic to save an hour or more per employee per month when an intranet is redesigned for usability. At typical, fully loaded hourly rates, this often results in approximate savings of $1,000 per year for each employee — a cool million for a mid-sized company with a thousand employees."

As I’ve noted before, technology is not the only answer to compliance. But if it can be designed to encourage employees to use it, compliance (and productivity) will increase.

UPDATE 17 February 2006: Allianz Australia says that their intranet was built in-house based on comments from employee focus groups which wanted their intranet to be a practical, everyday tool with a consistent look and feel, simple navigation tools, short cuts and company news. Their press release contains a screenshot of the intranet home page. There is also a link to a story about their internal e-learning program.