The corporate regulator is pushing investment banks and stockbrokers to strengthen their handling of conflicts of interest and inside information when producing equity research for investors.
Greg Medcraft, chairman of the Australian Securities and Investments Commission, on Thursday flagged the imminent release of guidelines that are intended to "preserve the independence" of research produced by sell-side analysts.
The long-awaited changes come after ASIC has identified flaws in how firms deal with the conflicts that arise between analysts and corporate advisory teams within banks, amid overseas scrutiny on the same issue.
Mr Medcraft, a former banker, said that in his time at ASIC a repeated concern had been how confidential information travelled through so-called "Chinese walls," which should prevent such flows between analysts from corporate advisers.
The goal of the new guidelines was to set out the watchdog's expectations for how firms handled confidential information, and managed conflicts in providing research, he said.
"What we've got do is preserve the independence of research analysts that people are relying on, it's as simple as that," Mr Medcraft told journalists at a Stockbrokers and Financial Advisers Association conference in Sydney.
"We consider these measures enable us to strike an appropriate balance between research analysts' contribution to a firm's decision to underwrite a transaction and maintain the integrity of research, in particular reducing the risk of pressure being placed on research analysts in relation to valuation information," Mr Medcraft said.
The guidelines will strengthen how firms identify and handle confidential information; and will restrict interactions between analysts and corporate advisory teams during capital raisings. They will also make recommendations on how research is funded, he said.
The change comes as European Union regulators are introducing sweeping new rules that will up-end the funding of equity research, which is often provided to clients for "free" with the aim of winning future trading business. Under the EU changes, research will have to be unbundled from other services, forcing investors to pay for analyst insights.
Mr Medcraft signalled he did not want to introduce restrictions similar to those in the EU, which would probably result in less equity research being produced in the market.
He made the comments in a speech that also canvassed the growing risks facing companies from the explosion in data that financial businesses have on their customers.
This financial data is an increasingly hot commodity, and Mr Medcraft said that how companies were able to protect the privacy of their customers would affect how much they were trusted by consumers.
"Transparency about what information is being collected, and what it will be used for will be critical," Mr Medcraft said.
After businesses and governments were earlier this month hit by a global cyber attack, Mr Medcraft said cyber resilience should also be a top priority for businesses, as a company's value and reputation could be destroyed "overnight" by such an attack.
