The financial regulator has put investors in the burgeoning private credit and equity markets on notice over a lack of transparency, arguing it can’t do its job in the dark.

Releasing a discussion paper on the dynamics between public and private financial markets, ASIC chair Joe Longo said his experience seeking information from private investors has been “inconsistent”.

“Companies should be put on notice,” he said.

“When the regulator seeks information, my expectation – ASIC’s expectation – is that you provide it.”

The opacity of private investors was particularly concerning because of the astonishing growth in the sector in recent years.

Private markets encompass private credit – non-bank lenders who provide loans to companies outside the traditional banking sector – and private equity – investments in a company whose shares are not listed on a public stock exchange.

Over the past decade, global private capital assets under management have tripled to $US14.6 trillion ($A23 trillion).

In Australia, they have almost tripled to $A148.6 billion, boosted by the growing influence of superannuation funds in the nation’s financial landscape.

This has amplified the chance of financial shocks coming from the private side of the market.

A research paper written by University of Melbourne professor Carole Comerton-Forde found the shift from public to private markets carried inherent risks, including that capital allocation may become less efficient, wealth creation less accessible and company valuations less transparent.

Mr Longo said private markets have their place in the financial landscape but law reform and better data sharing settings may be required to ensure they were transparent enough.

“My starting point is I can’t do my job in the dark, and so we can’t have an intelligent discussion as an economy and certainly as a regulator, without having more transparency,” he said.

“Now, I think there are some elements of the private markets that are a little bit defensive about this, that don’t like being questioned, that don’t like being asked.

“Well, you know what? We’re the regulator, and it’s in the public interest. It’s in everyone’s interest for us to know what’s going on in the private market.”

ASIC was also concerned about a decline in initial public offerings on the Australian stock market.

Mr Longo said public listings were declining globally, and it was too early to declare for certain that it was a structural change rather than a cyclical swing.

But there was work to be done to make it more attractive for companies to list on the Australian exchange.

“I think the ASX needs to be more proactive in this space, and we need to be thinking very carefully about whether regulatory settings of any kind are holding people back in participating in the public market,” he said.

ASIC’s executive director of markets, Calissa Aldridge, said the regulator was looking at what inefficiencies or complexities in the listing pathway were holding companies back from going public.

“We’re looking at companies that might seek to list abroad, and whether there’s opportunities for those companies to also be listed in Australia,” she said.

“But also looking beyond equities as well, and engaging in discussions around access to bonds, for example.

“It has always been an ongoing issue in our market, or just a feature of our market, that we have very little retail participation directly in the bond market.”

 

Jacob Shteyman
(Australian Associated Press)