Australian Securities and Investments Commission (ASIC): 2019-20 enforcement and cooperation

The Australian Securities and Investments Commission (ASIC) works towards ensuring a “fair, strong and efficient financial system for all Australians.”

Key to achieving this vision is taking action against wrongdoing to improve confidence in Australia’s financial markets, and cooperating with a range of partners and stakeholders.

In its 2019-20 annual report, ASIC highlights its key enforcement outcomes and cooperation initiatives.

ASIC enforcement

ASIC uses a range of regulatory and enforcement sanctions and remedies, including punitive, protective, preservative, corrective and compensatory action.

Enforcement priorities

ASIC prioritises enforcing:

  • The most serious cases, particularly those involving vulnerable consumers.
  • Royal Commission referrals.
  • Criminal conduct.
  • Misconduct related to superannuation and insurance.
  • Illegal phoenix activity.
  • Auditor misconduct.
  • New or emerging types of misconduct, including misconduct carried out online or with the use of emerging technologies.

Throughout the reporting period, ASIC also prioritised enforcing COVID‑19 related misconduct, such as misleading market announcements and opportunistic scams.

Key enforcement outcomes

Despite the challenges presented by the pandemic, ASIC has succeeded in building its enforcement capability. Key results throughout 2019-20 include:

  • 30 people convicted of financial crime, with 22 people receiving custodial sentences (including fully suspended). The total value of fines for criminal actions was $731,650.
  • Banning, removal or restriction of:
    • 79 people from providing financial services.
    • 29 people from providing credit services.
    • 51 people from directing companies.
  • 134 investigations commenced – an 11% increase compared to the previous reporting period.
  • 37 civil litigations completed with the total value of penalties rising to $24.9 million, compared to $12.7 million in 2018-19.
  • 57% increase in the number of custodial sentences imposed (including those fully suspended).
  • 35% increase in the number of individuals charged with non‑summary criminal offences.
  • 40% increase in the number of civil penalty claims made against individuals.

ASIC cooperation

ASIC cooperates with peer regulators and agencies, industry and the public to support its work in the financial sector.

Regional and international cooperation

International cooperation

ASIC engages with international regulators and agencies to:

  • Develop international regulatory policy.
  • Enhance cross-border cooperation and information sharing to combat misconduct and improve response to global threats.
  • Positively influence the operation and regulation of global financial markets.

In 2019, ASIC made 497 international cooperation requests and received 528 requests in relation to activities such as surveillance, supervision, enforcement, policy and licensing.

Throughout the reporting period ASIC also participated in a range of international forums such as the Asia–Pacific Economic Cooperation (APEC) Financial Regulators Training Initiative, and advocated across a range of areas including global regulatory coordination and harmonisation in financial technology (fintech) and regulatory technology (regtech).

Regional cooperation

ASIC promoted regional cooperation during the reporting period through:

  • Participating in regional supervisory colleges.
  • Signing a Memorandum of Understanding (MOU) with the Reserve Bank of New Zealand to enhance information exchange and cooperation.
  • Strengthening ties with IOSCO’s Asia–Pacific Regional Committee and addressing considerations related to COVID‑19. The International Organization of Securities Commissions (IOSCO) is the international body that brings together the world’s securities regulators.
  • Capacity building with regional partners, such as assisting the Indonesian Financial Services Authority in responding to emerging regulatory issues.

Innovation Hub and regtech

ASIC’s Innovation Hub helps innovative Australian businesses comply with regulatory requirements and provides a platform for international engagement on fintech and regtech ideas.

ASIC has undertaken a range of initiatives to promote Australia as a world leader in the development and adoption of regtech solutions for the financial services industry. This included the Voice Analytics and Voice‑to‑Text trial which assessed how voice analytics, applied to over 1,700 life insurance sales calls, could analyse and identify selling behaviour that fell short of community expectations.

Small business engagement and compliance

ASIC’s Small Business Engagement and Compliance team focuses on initiatives to assist Australian small businesses.

This includes engaging with and supporting small business owners in Australia who speak languages other than English. Problems may arise with these individuals in understanding or fulfilling compliance obligations due to language barriers.

Office of the Whistleblower

ASIC’s Office of the Whistleblower records and assesses disclosures received from whistleblowers and communicates with them as it undertakes inquiries.

Throughout the reporting period, 93% of cases required no further action by ASIC due to insufficient evidence, no actionable breach being disclosed, or the breach being in the jurisdiction or remit of other regulators.

ASIC also engages with stakeholders about implementing Australia’s corporate sector whistleblower protections regime, and monitors the whistleblower policy requirement which commenced on 1 January 2020. Under this requirement public companies, large proprietary companies, and corporate trustees of APRA‑regulated superannuation entities must have a whistleblower policy.

Inter‑agency collaboration on financial crime

ASIC collaborates with other Australian enforcement and regulatory agencies on serious and organised crime. This includes:

  • Serious Financial Crime Taskforce – a multi‑agency initiative targeting offences related to serious fraud, cybercrime and defrauding the Commonwealth.
  • Phoenix Taskforce – federal, state and territory agencies cooperate to combat illegal phoenix activity, including undertaking joint operations.
  • Fintel Alliance – a public-private partnership between federal and state government intelligence and law enforcement agencies, private sector businesses, and AUSTRAC.

Misconduct reporting

Analysis of reports of misconduct is critical in informing ASIC’s regulatory work.

Misconduct reports from the public

Members of the public are encouraged to report concerns about corporate and financial services to ASIC. These reports help ASIC and partner agencies to disrupt scams such as investment and loan scams, and to respond to offshore misconduct.

Breach reports from licensees and auditors

Australian financial services (AFS) licensees are required to report any significant breach (or likely breach) of their obligations to ASIC within 10 business days, as outlined in the Corporations Act. These reports help ASIC to respond to misconduct.

Australian Financial Complaints Authority (AFCA)

Financial firms must have internal dispute resolution procedures that meet requirements set out by ASIC and the Australian Financial Complaints Authority (AFCA).

AFCA commenced operations on 1 November 2018. It deals with financial services, credit and superannuation complaints made by consumers, small businesses and primary producers.

AFCA replaced a number of ASIC‑approved industry‑based schemes, including the Financial Ombudsman Service and the Credit and Investments Ombudsman, as well as the statutory Superannuation Complaints Tribunal.

Conclusion

Despite the challenges presented by COVID-19, ASIC has not showed any signs of slowing down in its enforcement of criminal and civil actions relating to corporate and financial market misconduct.

Key to its success is close cooperation with regulators and agencies, industry and the public, to ensure that Australia’s financial system is fair, strong and efficient.

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