Has ASIC finally become a watchdog with teeth?

22 February 2019

It is now eight years since Tony D’Aloisio was the chairman of the Australian Securities and Investments Commission (ASIC) and was heard likening the regulator to a policeman who turned up to a motor vehicle accident to clean up the mess.

Such an attitude gels with the recollection of financial services barrister, Noel Davis who, in a column published elsewhere in this edition of Money Management recalls being told by ASIC staffers of the regulator’s reluctance to pursue litigation against financial services miscreants because of the embarrassment of losing.

Just over 10 years on from the global financial crisis and armed with a new funding regime, more powers and access to greater penalties ASIC is portraying itself as more than just a country copper on clean-up duty. It is portraying itself as having transfigured from watch-poodle to fully-fledged watch-dog.

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The criticisms levelled at ASIC during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry together with the trenchant, if opportunistic criticisms of politicians, have prompted the regulator to bare its teeth.

If any proof were needed of this it was last week’s announcement by ASIC’s new deputy chairman and resident silk, Daniel Crennan QC, that the regulator would be going to the trouble and expense of appealing the recent Federal Court decision upholding the position of Westpac Securities Administration Limited and BT Funds Management Limited with respect to the difference between general and personal advice.

ASIC’s decision, led by Crennan, to pursue the appeal will warrant being closely monitored because it will be both costly and, if successful, will establish some important precedents for the regulator not only in terms of what represents “general” and “personal” advice for the purposes of key sections of the Corporations Act but also how litigious ASIC is prepared to be.

The appeal against the Federal Court decision must also then be weighed against the reality that ASIC is currently weighing up the possibility of legal action against a number of people whose names were referred to the regulator by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

The names of those referred by the Commissioner, Kenneth Hayne, have not been disclosed but are speculated to include some former and current senior financial services executives giving rise to the likelihood that any charges escalated to the courts will be hotly-contested with the defendants acutely aware of the fact that the penalties available to ASIC have been significantly increased.

As a result of Government legislation passing the Parliament last week, the maximum prison penalty for the most serious offences has been increased to 15 years and for civil penalties for companies to operate under an increased cap of $525 million.

As well, the maximum civil penalties for individuals will increase to $1.05 million.

The bottom line, therefore, is that ASIC is on a mission to prove its detractors wrong and someone will be made to pay.

Mike Taylor

Managing Editor

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