06 May 2020
ASIC has released Report 660 ASIC Enforcement Update July to December 2019 (Enforcement Update), providing a useful snapshot of the regulator’s increased litigation and enforcement activities. This follows the release of ASIC’s Corporate Plan 2019-23, where ASIC vowed that it would increase its enforcement activities and strive to better prevent consumer harm.
Although the update retrospectively reviews the period until 31 December 2019, in the face of COVID-19 ASIC has recalibrated its regulatory priorities to focus on challenges created by the pandemic and other highly significant matters. It is therefore likely that we will see a slight reduction in enforcement activities for the first half of 2020. More information on the changes to ASIC’s priorities can be found here.
Corrs has previously discussed ASIC’s Corporate Plan 2019-23 (the article can be found here). Since releasing the article, in the period until December 2019 ASIC has further developed its enforcement strategy for 2019-20 (Focus 2019-20).
What stands out from Focus 2019-20 is the increased toolkit and powers that ASIC currently has at its disposal to address and correct market misconduct. ASIC’s broad enforcement strategy involves the following:
The regulator has expressed that it will seek to cement positive changes in culture and conduct going forward through the use of the above strengthened supervisory and enforcement strategies.
In the wake of the Financial Services Royal Commission in 2019, ASIC was criticised for failing to prosecute and monitor corporate misconduct. It is clear from the Enforcement Update that ASIC has been seeking to correct this perception and has taken advantage of enhanced funding, increased regulatory tools and stronger civil and criminal penalties.
In summary, for the period 1 July to 31 December 2019:
A highlight of ASIC’s Corporate Plan 2019-23 was that ASIC would prioritise the recommendations and referrals from the Financial Services Royal Commission, monitor superannuation and address harms caused through insurance.
The Enforcement Update reflects these key priorities and conveys that ASIC has seen an increase in financial services-related results, summarised in the table below (in addition to a number of ongoing investigations and court proceedings):
Court enforceable undertaking
Dishonest conduct, misleading statements
Misappropriation, theft, fraud
Other financial services misconduct
An interesting case study in the Enforcement Update related to Westpac being ordered to pay $9.15 million penalty for 22 contraventions of the Corporations Act owing to poor financial advice from a failure to act in the best interests’ of clients. A key takeaway is that Australian financial services licensees are directly liable for breaches committed by their financial advisers, and the penalties can be severe.
The Enforcement Update has demonstrated that ASIC is willing and prepared to take action to protect markets and vulnerable individuals by pursuing financial services participants that breach laws and regulations. Although ASIC has indicated that it will shift its focus away from enforcement and investigation activities towards issues of immediate concern during COVID-19, financial services entities should not take this as an opportunity to relax their compliance with financial services laws.
This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.