ASIC takes strong stance to “litigate first” following the Financial Services Royal Commission

The Australian Securities and Investment Commission has indicated that its New Year resolution is to be much more litigious. The comments, made by new Commissioner Sean Hughes earlier this month come in the wake of recommendations by Commissioner Daniel Crennan QC, and comments by Commissioner Kenneth Hayne QC in his Interim Report of the Financial Services Royal Commission.

 

In Commissioner Hayne’s Interim Report, which was tabled before Parliament in September last year, he criticised ASIC for being unwilling to go to court against parties in the banking, superannuation, and financial services industry. Commissioner Hayne stated in the Interim Report that:

“much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the entity’s conduct. Infringement notices imposed penalties that were immaterial for the large banks. Enforceable undertakings might require a ‘community benefit payment,’ but the amount was far less than the penalty that ASIC could properly have asked a court to impose.”

Commissioner Hayne has been particularly critical on ASIC’s approach to negotiation with large entities. During the Royal Commission, the Commonwealth Bank spoke favourably of this, stating that it “prioritised persuasion and engagement with [ASIC]’s regulated community”. Commissioner Hayne took a contrary view, stating that these positive statements “point[s] to the regulated community having its way about when and how the law will be enforced”.

Speaking with the Australian Financial Review in the New Year, new ASIC Commissioner Sean Hughes has stated that “the mantra at ASIC going forward will be ‘why not litigate?’” and “people shouldn’t be looking on ASIC anymore as some sort of soft option to push a problem out of the way”. These statements come at a time where, according to Commissioner Hughes, ASIC is receiving a “vast increase in the number of breach reports and complaints”.

ASIC’s new strategy is expected to be provided to Commissioner Hayne shortly before his final report, which is due 1 February 2019. Company directors would be well minded to heed these warnings from ASIC and ensure that they are in compliance with their obligations, lest they find themselves on the receiving end of ASIC’s new litigation hungry strategy.

McCabe Curwood has expertise in advising clients on regulatory compliance with ASIC. If you are unsure whether you are complying with your obligations, or are concerned about the risk of litigation, get in contact with us today.

Contributors

Luke Dominish Lawyer
Jennifer Bradley Law Graduate