ASIC signals litigious intent
The Australian Securities and Investments Commission has issued a clear signal that it may become more litigious as it seeks to reshape itself in the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Commission.
ASIC chairman, James Shipton has released to the Joint Parliamentary Committee on Corporations and Financial Services the terms of reference for a Review into ASIC’s Enforcement Policies, Processes and Decision-Making Procedures which has canvassed greater use of legal test cases.
Shipton reinforced with the committee that there was “a demonstrable need for ASIC to immediately accelerate its interventions, supervision and enforcement in financial services and credit”.
He said the Royal Commission’s interim findings had clearly suggested that ASIC was expected to:
- “Pursue higher and more meaningful penalties in court. This is what current draft legislation will give us. In addition, we will be able to seek disgorgement of profits. With both higher penalties and disgorgement, there will be an even greater deterrence impact from court outcomes.
- Intervene more proactively when financial products cause detriment. This is what the product intervention power will give us.
- Enforce the obligation that financial products need to be designed and distributed with the end consumer in mind (instead of the financial institution). This is what the design and distribution obligations will give us.
- A directions power would enable us to reform and remediate without negotiating with the wrongdoer.”
The ASIC review document tabled by Shipton describes the review as being “forward-looking and designed to identify what changes should be made to the Enforcement Policies aligning with internal and external expectations”.
It said the review would particularly focus on policies, processes and decision-making procedures relevant to:
(a) Whether or not to enforce the law using criminal and civil proceedings or other regulatory options; and
(b) The effectiveness and timeliness of the conduct of litigation and of enforcement outcomes.
The document also discusses reviewing the weighting of ASIC’s enforcement goals of:
(a) specific and general deterrence;
(b) punishment/punitive effect;
(c) remediation; and
(d) public denunciation.
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.
