ASIC admits increased risk of litigation failures
The Australian Securities and Investments Commission (ASIC) has openly admitted that the risk of it not succeeding when it pursues litigation has increased because of its changed strategy around “if not, why not litigate”.
In an answer to a question on notice from Senate Estimates, the regulator said more court action could be expected to be taken by ASIC and that it believed recent Government legislative changes had it in a stronger position to do so.
However, it said there were no guarantees as to outcomes, notwithstanding he fact that it had a 90% litigation success rate over the past five years.
“Given ASIC’s ‘Why Not Litigate’ approach to enforcement, more court litigation is expected to be taken by ASIC,” it said. “In addition, the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 puts ASIC in a stronger position to pursue significant civil penalties and criminal sanctions against those who breach the law.”
“These changes are expected to mean more litigation against large and well-resourced institutions and in relation to new and existing laws that now carry penalties,” the regulator said.
However, ASIC acknowledged that this would “this will mean an increase in the complexity and uncertainty of ASIC litigation”.
“It can be expected as a consequence that ASIC’s litigation risk, including the risk of not succeeding in its court actions, will increase,” it said.
“ASIC’s enforcement litigation success rate has been above 90% for the five years to 2018-2019. ASIC does not make decisions about litigation lightly. It recognises its responsibility to use those resources for the public good, meaning that it the litigation it commences must be based on sufficient evidence and of benefit to the public in pursuing it.”
Recommended for you
The Reserve Bank of Australia (RBA) has lowered rates to a level not seen since mid-2023.
Financial Services Minister Stephen Jones has shared further details on the second tranche of the Delivering Better Financial Outcomes reforms including modernising best interests duty and reforming Statements of Advice.
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
