ASIC’s Annual Forum 2022: Enforcement priorities and the regulatory toolkit


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Published
Nov 4th '22
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Introductory remarks by Australian Securities & Investments Commission (ASIC) Deputy Chair Sarah Court at the ASIC Annual Forum, Hilton Hotel, Sydney on 3 November 2022.

 

Check against delivery

This session is about enforcement priorities and the regulatory toolkit, both topics dear to my heart.

 

Today we are releasing a set of enforcement priorities.

 

These build on and complement a range of our agency wide strategic projects, and are intended to send a signal to the market and to our stakeholders about the things to which we will turn our enforcement focus over the next year.

 

Before I turn to those priorities, I have a threefold message that I want to leave with you this afternoon:

 

  • First, ASIC remains deeply committed to enforcement.
  • Second, ASIC has a broad enforcement toolkit, and we are committed to using the full suite of those powers.
  • Third, ASIC has identified and is working through a suite of investigations in response to these priorities, which you will see evidence of in the next 12 months or so.

 

ASIC is committed to enforcement

There has been much written in business pages about the enforcement stance of the ‘new’ Commission – with the seeming perception that because we have moved away from the simple phrase ‘why not litigate’, ASIC has somehow gone soft on enforcement.

 

I am here to say, yet again, that nothing could be further from the truth.

 

Enforcement is at the heart of what we do. There has been no lessening of enforcement in the last 12 months or so. The Enforcement Committee now meets every week and every Commissioner is involved in those meetings. We have a large suite of significant investigations on our book.

 

Indeed, since June 2021, ASIC has taken court action against three of the four major banks, multiple times, including six matters against Westpac and its subsidiaries, two matters against ANZ and criminal charges laid against CBA and one of its subsidiaries Avanteos.

 

In addition to the banks, our enforcement remit has spanned the insurance, superannuation and credit sectors.

 

We have also taken court proceedings against many other large, well-resourced companies, including Mercer, IAG, Harvey Norman, Latitude Finance, MLC Life, Diversa and various AMP companies.

 

Stronger penalties

More penalties than ever before have been paid by large financial institutions for their misconduct, in addition to extensive remediation for consumers.

 

But we recognise that our work to increase the penalties imposed by courts in response to misconduct in financial services is far from complete.

 

Most of the matters we have litigated to date have been under the former penalty regime. Going forward, misconduct that wholly post-dates March 2019 will fall to be dealt with under the new penalty regime, which has maximum penalties more than tenfold those that existed before.

 

Market misconduct

We have also had a range of enforcement outcomes in the markets area and we continue a strong focus on dealing with market misconduct. The court has this year handed down decisions against Rio Tinto, and separately against GetSwift and its directors, for breaches of continuous disclosure laws. We have also recently taken court proceedings against Nuix and its directors, and Australian Mines, for similar alleged continuous disclosure misconduct.

 

We have been alive to the potential for market manipulation and so-called ‘finfluencer’ conduct. While we have several continuing investigations, one of those investigations recently resulted in a guilty plea from one individual to 42 charges of market manipulation and the illegal dissemination of information using the Hotcopper social media platform.

 

We also continue to dedicate resources and work with other agencies in relation to serious organised criminal cyber-related conduct involving accessing personal information and superannuation fraud.

 

We have prioritised what we call the financial services ‘gatekeepers’, including auditor misconduct with criminal prosecutions of Grant Thornton, Big Un and Halifax. The gatekeeper conduct extends to participant misconduct for systemic control failures culminating in a recent $27 million penalty against CommSec. We have also recently seen a liquidator sentenced for three years for dishonesty and fraud offences as a result of an ASIC investigation.

 

We have continued our work protecting investors, seeking and obtaining urgent relief when faced with investment schemes operating without a licence, or where we are concerned that investor assets will be dissipated. We have sought freezing orders, travel restraints and injunctive relief where we have been concerned for investors.

 

Criminal charges were recently laid against Chris Marco for 50 counts of fraud involving significant investors funds, in a matter which has been described in the media as Australia’s largest Ponzi scheme.

 

We have also been active in the credit area, being of the view that our job is to protect and disrupt activity targeting vulnerable consumers. We are testing the credit protections provided by the Credit Act in cases like Ferratum Australia, where we allege that prohibited credit fees are being charged, and in proceedings like Rent4Keeps, and Layaway Depot, where we allege that business models have been designed to unlawfully avoid the protections of the Credit Act. All those cases are currently before the court.

 

We have continued our enforcement action in relation to Cigno, and successfully appealed to the Full Federal Court that a ‘financial supply fee’ charged by Cigno was in actual fact an unlawful charge made for providing credit. That matter is now subject to a Special Leave Application to the High Court that we will vigorously defend.

 

I could go on, and talk about our work in superannuation, in insurance, our recent crypto and greenwashing actions – but I will save those for another opportunity.

 

I leave you, I hope, with the clear message that ASIC has been, and will be, committed to court-based enforcement, and our work in the courts every day is evidence of that fact.

 

Enforcement is broader than court-based outcomes

My second message is that enforcement is broader than court-based outcomes.

 

ASIC receives approximately 10,000 reports of misconduct each year. While we consider and assess all of them, we cannot and should not launch formal investigations for every report received.

 

We consider a range of factors to ensure ASIC’s finite resources are used to maximum effect and that any ASIC action taken is in the public interest. An enforcement investigation is one of many potential responses to a report of misconduct, others include surveillance, monitoring systems changes, remediation or to inform our further inquiries.

 

We cannot take every matter to court, and clearly not every matter warrants a litigated outcome. But while we have a range of tools – stop orders, product intervention orders, infringement notices, enforceable undertakings, public warning notices – our current enforcement approach in no way departs from the important recommendations and approach set out in the Royal Commission.

 

And just to be clear, where misconduct is engaged in by a large financial institution and has the potential for significant consumer harm, a court-based outcome, with the addition of a significant financial penalty, will always be our most likely enforcement response.

 

ASIC’s Enforcement priorities

Now coming to the main focus of these remarks, our Enforcement Priorities.

 

We have identified five key areas that we consider will be enduring enforcement priorities for ASIC. These include conduct which impacts or targets First Nations people, conduct that targets or predates on vulnerable consumers, and serious misconduct that is damaging to our market integrity. As I have already just noted, we will also always focus on systemic compliance failures by large financial institutions that result in consumer harm, and on new or emerging conduct risks within the financial system.

 

2023 priorities

As has been already discussed this morning, in 2023 we will be looking further at misleading misconduct relating to greenwashing and crypto investments.

 

Another cornerstone of our enforcement work going forward will be ensuring that consumers receive the benefits of the new design and distribution obligations. As has been much said, we see these new obligations as a gamechanger. These new laws were hard fought for by consumer groups and their allies, and we are determined to maximise and test these increased protections. We will not be deterred from taking cases where the legal outcome is less than certain, if we are of the view that consumers are being sold harmful products.

 

Continuing the consumer protection theme and recognising rising cost of living pressures, we will also closely monitor for predatory lending practices and high-cost credit, especially that provided by unlicensed operators. We will increase the testing of our jurisdictional perimeter in order to maximise the protections offered by the credit laws to those financially vulnerable consumers that need to rely on short term credit options.

 

And we will continue our work to disrupt investment scams and work with other regulators and industry to make it harder for scammers to reach Australians.

 

In the superannuation industry, we are concentrating on poor governance including expenditure of member funds, failure to deliver value for members due to conflicts of interest and oversight failures.

 

In insurance, we will retain our focus on pricing promises to consumers which we are concerned are not being delivered upon. We are also concerned about and will be examining unfair contract terms in insurance.

 

We will maintain our interest on misconduct that involves misinformation through social media about investment products, including so-called ‘finfluencer’ conduct.

 

In the markets area, while we always focus on governance and directors’ duties failures, this year we are particularly interested in failed property schemes that expose investors to significant loss. Finally, but importantly, as is often the case with volatile and stressed market conditions, we are seeing a spike in poor market conduct in energy and commodities futures markets, as parties seek to protect their positions and avoid losses or insolvency. We are examining these markets for potential manipulation, and will take enforcement action where we think it necessary.

 

It is a long list of priority areas, and we have a lot of work ahead of us. We look forward to the challenge, and to a good discussion with the panel today.

 

Thank you.

 

Source: © Australian Securities & Investments Commission. Reproduced with permission.

 

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