Overview

The Australian Securities and Investments Commission (ASIC) has released its latest enforcement and regulatory activity Report (REP 757) highlighting some of ASIC’s key enforcement actions between October and December 2022 and providing a 'summary' of outcomes for the last six months of 2022.  The regulator also reiterates ASIC's enforcement priorities for 2023.  

Key points 

Enforcement is 'at the heart of ASIC's work' 

A key message in the report is that ASIC's focus on enforcement as a means of protecting consumers and investors from harm and deterring misconduct is undiminished – ASIC Chair Joe Longo states that 'enforcement has been, and always will be, at the heart of ASIC's work'.  

The report also indicates that ASIC plans to continue its current 'targeted' approach to enforcement.  The report states that ASIC intends to: 

'build on our existing work of actively targeting cases of high deterrent value involving egregious harm or misconduct, to ultimately address consumer and investor harm'.

Court based outcomes

In terms of court based outcomes for H2 2022, ASIC states that:

• the courts imposed a total of $76.3 million in civil penalties (down from $145.8 million in H1 2022) 
• 11 civil penalty cases commenced
• 15 individuals were charged by the Commonwealth Department of Public Prosecutions in criminal prosecutions.  Seven individuals received custodial sentences (five of these individuals received fully suspended sentences), eight individuals received non-custodial sentences
• 86 individuals were charged with strict liability offences in summary prosecutions
• According to ASIC, a total $222.1 million in civil penalties and 312 criminal charges were laid in the 2022 calendar year.  

Some key outcomes highlighted by ASIC for Q4 2022

• DDO enforcement: ASIC highlights that it issued 14 design and distribution obligations (DDO) stop orders in Q4 (of a total of 22 issued to date).
• Greenwashing: ASIC also highlights its actions to address greenwashing.  ASIC issued infringement notices to three entities for 'misleading sustainability related statements' during the period.  

2023 outlook: ASIC's enforcement priorities 

As flagged, announcing the release of Report 757, ASIC issued a 'warning' to businesses that it will be: 

'targeting greenwashing, predatory lending and misleading insurance pricing promises this year, as part of a continuing focus on protecting consumers from financial harm'.

Expanding on this, ASIC adds that it will 'have a strong focus on enforcement activity targeting': financial scams, cyber and operational resilience, and investor harms involving crypto-assets in line with the regulator's previously announced enforcement priorities for 2023.  

To recap, ASIC has indicated the following as areas of focus this year:

• poor design, pricing and distribution of financial products
• 'misleading conduct in relation to sustainable finance including greenwashing' 
• 'misconduct involving high risk products including crypto assets'
• disrupting and combatting investment scams
• 'protecting financially vulnerable consumers impacted by predatory lending/high cost credit including conduct by unlicensed or "fringe" entities' 
• 'misleading and deceptive conduct relating to investment products which obscures the risk, performance or nature of financial products
• 'misconduct in the superannuation sector' 
• failure by general insurers to deliver on pricing promises to consumers
• 'finfluencer' conduct 
• failures of governance and directors duties 'including those related to property schemes that expose investors to significant loss'
• manipulation in the energy and commodities derivatives markets
• unfair contract terms 

In addition, ASIC also intends to focus on its five 'enduring priorities':

• misconduct that is damaging to market integrity including insider trading, continuous disclosure failures and market manipulation
• misconduct impacting First Nations peoples
• misconduct involving a high risk of significant consumer harm, particularly conduct targeting financially vulnerable consumers
• systemic compliance failures by large financial institutions resulting in widespread consumer harm
• new or emerging conduct risks within the financial system.

New indicative regulatory developments timetable released 

ASIC has also released a new (indicative) 'regulatory developments timetable' setting out ASIC's planned timeframes for regulatory initiatives for Q1 2023 across all sectors.

Among other things, the timetable flags that, subject to the passage of the necessary legislation, ASIC plans to provide guidance on: 

• the implementation of the Financial Accountability Regime (FAR)
• the Compensation Scheme of Last Resort (CSLR)
• reference checking and information sharing requirements for financial advisers and mortgage brokers (update Information Sheet 257)

[Sources: ASIC media release 15/02/2023; ASIC regulatory developments timetable; ASIC report 757 ASIC enforcement and regulatory update: October to December 2022; Summary of enforcement outcomes: July to December 2022]