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thesundaytimes - told to improve complaints handli

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    ASX passes first watchdog exam
    By Geoffrey Newman and Geoff Elliott
    THE Australian Stock Exchange has passed its first annual exam from the corporations watchdog but has been told to beef up its supervision of the futures market and improve complaints handling.

    The Australian Securities and Investments Commission reported yesterday that the ASX had fulfilled its corporate governance responsibilities.

    "The report follows a comprehensive review of the ASX's arrangements by ASIC and confirms that the ASX is operating a market of high integrity," ASIC deputy chairman Jeffrey Lucy said.

    This was the first assessment by ASIC since reforms to the Corporations Act were enacted in March last year which allowed the exchange to regulate itself via its new Corporate Governance Council.

    In return the new rules, set up after a string of high-profile corporate collapses such as HIH and One.Tel, also meant the exchange now faces annual investigations from ASIC.

    While generally complimentary, the ASIC probe did unearth some deficiencies, in particular the exchange's supervision of futures and warrants trading and its system for handling complaints, but they did not amount to a lack of compliance with the law.

    ASIC said that although the ASX futures market was still small, it would need to beef up supervision if volumes increased.

    "In our assessment, ASX and particularly ASXF did not demonstrate that they have comprehensively reviewed their approach to supervision in light of the different nature and characteristics of these products, or that they have considered and addressed the specific risks of those markets," the report said.

    "While trading in ASXF is subject to scrutiny, the detailed system parameters developed for supervision of trading in ASX's other markets have not yet been developed for ASXF."

    In particular ASIC was concerned that the supervision regime did not reflect the fact the exchange did not directly supervise the market in the underlying securities in products such as warrants traded over foreign indices and commodities futures.

    ASIC said the ASX needed a central system for handling complaints about trading activity.

    Separately yesterday, the ASIC annual report revealed that chief executive Richard Humphrey picked up $1.35 million for the financial year, compared with $1.23 million in 2001-02.

    Karen Hamilton, executive general manager, who led the ASX's corporate governance initiatives through the year, earned $492,285.

    Mr Humphrey and chairman Maurice Newman said the independence of the ASX board was "not a view we believe to be reasonable, widely supported, or in the best interests of shareholders".

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