Financial services businesses should not underestimate how helpful it can be in working with ASIC after a breach
If you’ve been served with an ASIC notice, first, take a deep breath. Working with ASIC after a breach, rather than against it, may be a better, quicker way for financial services businesses to get back on track than ‘lawyering up”. Don’t underestimate how helpful it can be when approached the right way.
Keeping a calm perspective will help you to assess your position and form a strategy that takes all the facts into consideration. Fighting allegations at any cost will not suit every circumstance, or even many. So don’t bolt off to instruct lawyers to litigate until you have considered your position and strategy carefully.
Here’s what we recommend you do:
- Find out who you’re dealing with. Different sections of ASIC each have their own approach. Stakeholder teams are usually interested in a collaborative approach. If it’s already in enforcement, a different strategy will be needed.
- Know your business strategy. Remind yourself of your goals, objectives and your client’s needs – is a quick resolution important to you?
- Review the facts. Is ASIC alleging that you are in breach of one of the laws it administers? Do a triage – look at the conduct or product at issue. Can it be remedied easily, eg, by putting together a robust compliance plan that includes communicating with clients? The impact on consumers and your proposed remediation are always going to be at the forefront of ASIC’s thinking.
- Get advice. Put together a plan to get you and your clients the best possible long-term outcome. Try to contain the issues of concern to the narrowest possible scope. This is both a science and an art. Lawyers or compliance professionals can be very helpful in identifying all the issues (some of which may be technical or not obvious), to prioritise the issues and assist with your strategy.
At this point you can make a decision. To hold or to fold?
You may have no option but to oppose ASIC action where the allegations are completely unsubstantiated. But if there’s any merit in their concerns, don’t underestimate the cost, stress and distraction that fighting will cause to your business.
On the other hand, immediate full cooperation can minimise fines and result in a (relatively) positive press release. Recently here have been a number of high profile examples of the opposite, where little or no cooperation or inadequate action to address ASIC’s concerns, resulted in extensive enforceable undertakings or even full bans, and a punitive tone in the media release.
When deciding, put yourself in ASIC’s shoes. How are they likely to view your conduct? Consider:
- Was your conduct inadvertent or deliberate and reckless?
- Was the breach an isolated incident?
- What was the impact on the market and/or your clients? Was it minimal or considerable?
- Did you gain a benefit?
- What was the damage to third parties?
- Do you have a record of non-compliance?
Once you have decided, then choose your weapon. Litigators excel at being aggressive and adversarial; but will this inexorably lead to a tougher outcome? Commercial lawyers who seek common ground upon which to forge a deal that both parties can live with may be better-suited for a frank discussion with the regulator. Decide which you need and check your lawyer’s natural style before appointing them.
Remember, regulation is a two way street. If you want to avoid ASIC scrutiny, be proactive. Develop an approach of partnering with the regulator. Yes, you read that correctly! Don’t underestimate how helpful the regulator can be to your business.
If you have developed a service or product that is a bit ‘out there’ and novel, then don’t be afraid to contact ASIC to discuss potential regulatory issues. This is an opportunity for you to educate ASIC and help them stay ahead of the innovation curve of products, technology and distribution methods. Policy is only as effective and as relevant as the information and knowledge that the regulator has. It can position you as the industry leader.
