Criminal prosecutions expected by ASIC

Alex Burke,  Senior Writer,  No More Practice Education

Given the criticism levelled at ASIC in the final Royal Commission report, it's unsurprising the regulator has issued an update on how it's proceeding with Hayne's recommendations.

You may recall the report noted that "ASIC does not perform its functions as a service to [entities it regulates], and it is well‑established that ‘an unconditional preference for negotiated compliance renders an agency susceptible to capture’ by those whom it is bound to regulate.”

So how is ASIC responding?

Referrals from the Commission

ASIC noted that the Royal Commission had made 11 specific referrals in relation to eight financial services entities, along with two referrals made over the course of the hearings – these referrals have been “prioritised.” Beyond these, ASIC said it is investigating 12 other issues that arose throughout the Commission hearings, including Dover Financial Advisers.

More broadly, ASIC said it was “undertaking a large volume of work on a range of misconduct relating to major financial institutions and their representatives” and that this would likely result in a “number of referrals to the Commonwealth Director of Public Prosecutions for assessment for criminal prosecution.”

Based on this, it would appear ASIC is proactively responding to Hayne’s suggestion that the regulator should consider whether a “court should determine the consequences of a contravention.”

Broader changes to the regulator

ASIC will also be establishing a separate Office of Enforcement, which will be “responsible to the Commission for investigation and enforcement of contraventions of the laws that ASIC administers.”

While this idea came out of ASIC’s Internal Enforcement Review (IER) last year, it also appears to be addressing Hayne’s comments with regards to the regulator’s alleged “preference for negotiated compliance.” Teams working within the Office of Enforcement will be “separate, as much as possible, from non-enforcement related contact with regulated entities.”

ASIC also heralded the “call for greater regulatory accountability,” referencing the new oversight body for Australia’s key financial regulators recommended by the Commission. “We will be proactive in working with the new oversight body,” ASIC explained, “to develop regulatory performance measurement frameworks that provide a public mechanism for monitoring our effectiveness, with particular focus on the level of impact ASIC’s work has on the overall fairness, strength and efficiency of the Australian financial system.”

Wrapping it up

It would appear, based on ASIC’s note, that it’ll be a long while yet before the fallout from the Royal Commission begins to clear –  after all, the regulator reaffirmed its commitment to “take on new responsibilities and, in many cases, simply do more.”

We’ll keep you posted on how ASIC plans to use its new powers over time.


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