Australia – ASIC’s Enforcement Update.

What you need to know

 

• ASIC has released its bi-annual enforcement update for the period from January to June 2019. It provides an interesting insight into the focus of ASIC's enforcement activity.
• ASIC continues to pursue its 'Why not litigate?' approach to enforcement. ASIC's new Office of Enforcement, comprising of Markets Enforcement and Financial Services Enforcement teams (headed by Executive Directors Sharon Concisom and Tim Mullaly respectively), is now in place and is looking to accelerate court-based enforcement matters.
• ASIC continues to increase its enforcement capacity (including as a result of $404m funding over four years) and focus. It singles out by way of example that Australian financial services 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 ASIC to pursue the new civil penalties, including penalties of up to $525 million per contravention. It also highlights that a person engaging in dishonest conduct in carrying on a financial services business now faces imprisonment of up to 15 years.

 

Enforcement in the first half of 2019

 

In the first six months of this year, ASIC has enforced the law in the following areas which 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 financial services;
• market misconduct that threatens to create uncertainty and erode investor confidence.

 

Overall, there has been a 20% increase in the number of enforcement investigations, with a particular focus on larger institutions. There has been a significant number of: 

 

• Prosecutions – including 10 individuals charged in criminal proceedings, and 1919 individuals charged in summary prosecutions for strict liability offences; 
• Banning orders – including 103 individuals removed or restricted from providing financial services or credit, and 29 individuals disqualified or removed from directing companies. 

 

As at 1 July 2019, ASIC has matters in the following areas which are awaiting a court decision: 

 

AREA OF ENFORCEMENT	CRIMINAL	CIVIL
Corporate governance – including actions against liquidators and directors and misconduct related to insolvency	9	9
Financial services – including misconduct relating to provision of credit, dishonest or misleading conduct, misappropriation, theft and fraud	17	29
Markets – including continuous disclosure, insider trading and market manipulation	8	18
Small business – including action against persons or companies, misconduct related to registration and licensing	161	–