ASIC’s bi-annual enforcement update (Rep 625) provides an overview of enforcement outcomes, priorities and cases from 1 January to 30 June 2019. It provides interesting statistics and insights into ASIC’s adoption and implementation of the “why not litigate” enforcement stance in the first half of 2019.
Firstly, it is worthwhile to note that ASIC’s new Office of Enforcement continues to expand its expertise and team through recruitment programs for analysts, investigators and lawyers, with an aim to increase its capacity to investigate and litigate against market, corporate and financial sector misconduct. This ASIC expansion is being funded by the Australian Government to a total sum of $404 million over 4 years.
ASIC has tools and powers to deliver a stronger legislative, enforcement and regulatory framework with tougher penalties. ASIC noted that any AFS licensees who fail to ensure their financial services are provided “efficiently, honestly and fairly” as required by section 912A of the Corporations Act 2001 can expect the Office of Enforcement to pursue the harsher civil penalties now available to ASIC, including financial penalties of up to $525 million per contravention. When a person engages in dishonest conduct in carrying on a financial services business, they now also face imprisonment of up to 15 years.
In the first half of 2019, ASIC enforced the law in the following areas that it identified as having the potential to cause the most significant harm:
- harm caused by
corporate gatekeepers, including auditors and liquidators, who hold positions
of responsibility and trust;
- dishonest, misleading and deceptive conduct by those providing financial advice or services; and
- market misconduct that threatens to create uncertainty and erode investor confidence.
ASIC reported a 20% increase in the number of enforcement investigations, with a particular focus on large institutions. There has been a significant number of prosecutions, banning orders and investigations including:
- Prosecutions – 10 individuals were charged in criminal proceedings with a total of 70 criminal charges made;
- Banning Orders – 103 individuals were removed or restricted from providing financial or credit services with a further 29 individuals disqualified or removed from directing companies;
- Investigations – 77 investigations commenced with a total of 48 completed thus far.
In the first half of 2019, ASIC recorded 51 financial services enforcement outcomes:
|Misconduct Type||Criminal||Civil||Administrative||Court Enforceable Undertaking||Negotiated Outcome||Total
|Dishonest conduct, misleading statement||2||3||7||0||0||12|
|Misappropriation, theft, fraud||1||3||2||0||0||6|
|Other financial services misconduct||0||4||19||1||7||31|
As at 1 July 2019, ASIC had 17 criminal and 29 civil financial services-related matters underway that had not reached a final result.
Aside from financial services, Rep 625 includes enforcement information on the areas of corporate governance, markets and small business.
If you would like to speak to us in relation to complying with your obligations as a financial or credit service provider, please contact us.
Melody assists in preparing, reviewing and negotiating legal documentation for participants in the financial services industry. Melody also assists with developing, reviewing and amending compliance documentation. She also supports the Compliance Consultants with the preparation of AFSL and ACL applications, variations and compliance reviews. Melody provides ongoing legal support and also assists in implementing ongoing compliance support, updating procedural documentation and preparing compliance reporting for Compliance Committees and Boards of Directors.