In the anticipated wait for the final report to be released, the industry and regulators have been contemplating the Commissioner’s open-ended questions on the issues in the industry as set out in his interim report. For the regulators and particularly ASIC, the Commissioner was heavily critical of their failure to take action against banks and superannuation providers.
The final report has now shed light on the recommendations for regulators, with the Commissioner making 76 recommendations.
“litigation of the kind now under consideration is the exercise of public power for public purposes. It is litigation by a public authority to enforce the law. A private plaintiff can always choose not to pursue, to abandon or to compromise that plaintiff’s private rights. A private plaintiff may take any of these steps for any reason or no reason. But altogether different considerations arise in connection with the public enforcement of the law.
Breach of the law carries consequences. Parliament, not the regulators, sets the law and the consequences. There are cases where there is good public reason not to seek those consequences. Prosecution policies have always recognised that there may be good public reasons not to pursue a particular case. But the starting point for consideration is, and must always be, that the law is to be obeyed and enforced. The rule of law requires no less. And, adequate deterrence of misconduct depends upon visible public denunciation and punishment.”Accordingly, the Commissioner is inviting ASIC to take a more aggressive stance in its approach to litigation. As ASIC is to enforce the law, it should be more inclined to do so through litigation.
As explored in our previous article, ASIC has recently made statements that it will take a strong stance to litigate first following the Commissioner’s suggestions in the interim report. These criticisms were based on ASIC’s preference to negotiate enforceable undertakings as opposed to litigating. The Commissioner made reference to this in the final report, pushing ASIC to adopt a policy of only accepting an enforceable undertaking in circumstances where the party offering it acknowledges that it has breached the law.
The Commissioner also recommended that infringement notices, functionally fines issued by ASIC, should only be used for administrative failures, and that where an evaluative judgment has to be made about a party’s conduct, or the party is a large corporation, they will not be enough to properly enforce compliance.
Mr Frydenberg has also stated that the government has further committed to an expansion of the Federal Court’s jurisdiction in relation to criminal corporate crime in order to “ensure prosecution of financial crimes does not face delays as a result of heavy caseloads in the courts". This is in the context of the government’s recent provision of $70.1 million for ASIC’s enforcement capabilities and supervisory approach to pursue criminal prosecutions for financial misconduct and $41.6 million to the Commonwealth Director of Public Prosecutions to prosecute briefs from ASIC.
The final report acts as a reminder for companies, and particularly directors, of the importance to monitor regulatory compliance and to avoid complacency about risk to ensure they avoid the ire of the regulator’s sharpened focus.
McCabe Curwood is experienced in advising its clients on regulatory compliance. Company directors would be wise to seek advice now to ensure that they are complying with their duties.