The assumption that disclosure always fixes market failures is not “borne out in practice”, according to the Australian Securities and Investments Commission (ASIC).

In a speech to the Corporate Governance Forum, ASIC Commissioner John Price outlined lessons learned since the Wallis inquiry, plus proposals relating to the upcoming financial system inquiry.

He says there are “a number of significant limitations” to disclosure as a regulatory tool.

People might not have the time or capacity to read disclosure documents, and could misunderstand them if they do.

“Understanding all this gives us potential to improve regulatory design, with a better understanding of consumer behaviour and decision-making.”

Mr Price says advances in technology and globalisation since the Wallis inquiry have brought benefits, but also challenges.

The risk of cybercrime has increased, and globalisation requires regulators to meet international standards.

Proposals ASIC has made to the financial system inquiry include developing a mechanism to monitor and address systemic risk and encouraging further integration of international markets.

Mr Price says a more flexible regulatory toolkit would give ASIC greater scope to address market problems, and he calls for a user-pays funding model that better reflects market regulation costs.