The growth in financial services, their increasing complexity and the need for proactive regulation are the three key challenges facing the Australian Securities and Investments Commission, says ASIC Chairman Greg Medcraft.

Regulators need to be on the front foot “rather than being reactive and arriving at the scene of the accident”, he told the American Chamber of Commerce in Sydney last week.

“This is a major challenge for ASIC, particularly with our limited resources,” he said.

Mr Medcraft says a high level of engagement is needed for proactive regulation.

“You need to be able to identify which sectors pose the greatest risk. Identifying risks requires a detailed understanding of the sector, understanding that is only gained through stakeholder engagement and surveillance.”

He says that being proactive also has a deterrent effect. “People will think twice if they know they’ll be held to account.”

The growth of superannuation has also contributed to the “growing regulatory perimeter”, he says, with more products, more investors and larger investment funds.