ASIC ‘cannot be everywhere’

Speaking at the parliamentary joint committee on corporations and financial services on Monday, Mr Longo outlined how ASIC decides what enforcement action to take in each circumstance.

“No regulator can be resourced to do everything. As I’ve said before, ASIC cannot be everywhere, and we need to think very carefully about our choices and how we use our resources,” he said.

“Deciding what enforcement action to take in each circumstance is not always easy. Our published guidance sets out a range of considerations which may be relevant. For example, the nature and seriousness of the suspected conduct, the level of transparency and co-operation with our processes, the strength of the evidence and the public benefit in taking the enforcement action.”

Referring to the regulator’s breach reporting regime launched in October last year, Mr Longo said it would complement “the intelligence we are able to consider in delivering on our regulatory and enforcement priorities”.

“ASIC’s first report under that regime, published late October, shows that some improvements are needed and that more work needs to be done to appropriately identify and report on the root cause of breaches,” Mr Longo said, hinting at the lower-than-expected compliance with the regime.

Specifically, in late October, ASIC revealed that only 6 per cent of the licensee population lodged a report, with only 878 of the 8,829 submitted reports said to be related to financial advice.

Moreover, Mr Longo explained that the regulator operates within a parliamentary framework and a larger complaints system.

“To complement ASIC’s strong regulatory and enforcement focus, there is a framework set up by the Parliament to ensure consumers have access to an efficient and accessible redress system for individual complaints,” he said.

Mr Longo added: “Through our enforcement work, we hold to account those who contravene the law, and we do this using a broad regulatory toolkit. We continue to actively target cases of high deterrent value and those involving egregious harm or misconduct. In the last financial year alone, ASIC completed more than 1,000 surveillances and commenced more than 100 investigations.”

Pointing out that litigation would “always be an important part of ASIC’s regulatory toolkit”, he said that despite the cost involved, taking this action sends a strong message about compliance with the law.

“In the last financial year, we completed 61 civil litigation actions, secured $229.9 million in civil penalties and commenced another 75 civil litigation actions. ASIC secured criminal convictions against 33 individuals and commenced another 50 criminal actions,” Mr Longo said.

“In other cases, it may be more appropriate for ASIC to take non-court-based enforcement action. This type of action is often protective and is an important part of ASIC’s role to deter and prevent serious misconduct from occurring in the first place.

“In appropriate circumstances, this type of action can achieve the greatest investor and consumer benefit. It can also be undertaken alongside litigation to send an even stronger message about the concerning conduct.”

In its response to the Australian Law Reform Commission’s (ALRC) Interim Report B into financial services legislation, the Financial Services Council (FSC) said it strongly opposes the idea of delegating more lawmaking powers to the corporate regulator.

The FSC contended that the ALRC’s proposed new legislative hierarchy would give ASIC “excessive” lawmaking power, with the only oversight and control coming from parliamentary disallowance.