ASIC has released its 2020-2024 strategic plan: enforcement remains a key priority

7 minute read  01.09.2020 Kate Hilder, Mark Standen

Snapshot: The key priorities outlined in ASIC's Corporate Plan 2020-24


Key takeouts

  • A 'two-pronged approach': In the immediate term, ASIC will continue to focus on the five strategic priorities identified in the regulator's interim corporate plan which are aimed at addressing impact of the COVID-19 pandemic.  In addition to, and alongside these focus areas, ASIC will progress a range of longer term projects, including implementation of the recommendations of the Hayne Commission over the next four years.  
  • Longer term focus areas: ASIC's seven key priorities over the next four years are: '1) promoting confident participation in the financial system to support long term economic recovery; 2) deterring poor behaviour and misconduct through our ‘Why not litigate?’ discipline and driving cultural change using all of our regulatory tools; 3) improving entities’ management of key risks to prevent and mitigate harms to consumers and promote a healthy financial system and economic growth; 4) addressing consumer harm as a result of elevated debt levels and hardship, with a particular focus on predatory lending; 5) reducing poor product design and restricting mis-selling; 6) reducing misconduct by company directors and professional service providers; and 7) delivering as a conduct regulator for superannuation'. 
  • Climate remains a focus (despite the pandemic): Among other things, the plan flags that disclosure of climate risk and governance practices will continue to be a focus for ASIC in 2020/21.  For example, ASIC plans to 'conduct surveillance to assess the extent to which product issuers are engaging in "greenwashing" that results in consumer harm' and review the extent to which listed companies have adopted 'appropriate governance structures to identify and manage climate related risks'.  

ASIC's strategic priorities 2020-24

The Australian Securities and Investments Commission (ASIC) has released its corporate plan for 2020-24.  The plan states that ASIC will pursue a 'two-pronged approach', continuing to focus on the five strategic priority areas guiding ASIC's response to the pandemic which were identified in ASIC's interim plan in the near term (or for as long as is appropriate), while concurrently resuming work on longer term strategic projects that were disrupted as a result of COVID-19.

ASIC will remain somewhat flexible in its approach and adapt to the changing environment.  ASIC stating that it will 'continually assess and prioritise our focus areas as threats and harms evolve across our regulated sectors' as well as continue to engage stakeholders 'to help maintain the proper functioning of the financial system'.

Announcing the release of the plan, ASIC Chair James Shipton said that ensuring confidence in the financial system remains ASIC's key purpose.  

'Our core purpose is to ensure confidence in a financial system that, even under stress, can remain fair, strong and efficient.  Confidence is the bedrock of the economic recovery process.  This is the purpose of all our work, both in the immediate context of the pandemic and beyond it. We will continue to respond rapidly and strategically to the threats arising in an uncertain environment.'

Two executive changes

ASIC has made two senior organisational changes to support the execution of the plan.  

Warren Day has been appointed Chief Operating Officer (Mr Day was formerly Executive Director, Assessment and Intelligence) and Zack Gurdon has been appointed to the new position of Chief Risk Officer. 

ASIC's priorities 2020/21 – the five priorities in the interim plan will remain a key focus

In the short term, ASIC will continue to focus on the five key priorities identified in ASIC's interim corporate plan 2020-21.  Namely: 1) 'protecting consumers from harm at a time of heightened vulnerability; 2) maintaining financial system resilience and stability; 3) supporting Australian businesses to respond to the effects of the COVID-19 pandemic; 4) continuing to identify, disrupt and take enforcement action against the most harmful conduct; and 5) continuing to build our organisational capacity in challenging times'

The projects falling under each of these is outlined at pages 9-18 of ASIC's 2020-24 Strategic plan. 

'Continuing and new' projects 2020/21

Continuing and new projects flagged for implementation in 2020/21 include the following:

  • The establishment of 'new ASIC-wide working groups' to tackle (including through taking enforcement action) the issues of: false and misleading advertising; scams and unlicensed advice. 
  • Conducting 'long-term pandemic scenario analysis' to understand the 'pandemic-driven impact of different long-term economic and environmental scenarios on consumers, investors and the markets we regulate, and assess the best regulatory responses to those scenarios.'
  • Various governance projects including: a) conducting a targeted governance review of 'a select company to assess shortcomings in culture, governance and accountability frameworks'; b) conducting a review of whistleblower policies/engaging with 'selected companies' to review the effectiveness of their whistleblower programs; and c) examining 'whether disclosures in corporate governance statements are effective in promoting a more informed market and better and transparent governance practices'.   Under ASIC's close and continuous monitoring program (CCM program) ASIC will: continue to engage with financial institutes to ensure they are prioritising improving consumer outcomes; monitor how they are  responding to the findings of reviews into breach reporting practices and internal dispute resolution; and recommence 'targeted thematic reviews' of how their systems, processes and behaviours impact consumer outcomes. 

Climate Risk 

Among other continuing projects, the plan flags that climate risk disclosure and governance will remain a focus for the regulator in 2020/21.  ASIC states that it will:

  • 'Conduct surveillance to assess the extent to which listed companies have adopted appropriate governance structures to identify and manage climate-related risks, and to which climate related disclosure is useful in investor decision making'
  • 'Identify key challenges faced by companies in this area'
  • 'Conduct surveillance to assess the extent to which product issuers are engaging in ‘greenwashing’ that results in consumer harms'
  • 'Represent Australia on IOSCO’s Sustainable Finance Task Force and IOSCO’s Asia Pacific Regional Committee Sustainable Finance Working Group'

ASIC's priorities over the four years to 2024

The plan also identifies seven core priorities that ASIC will pursue, in addition to the workstreams related to its response to the pandemic, for the next four years.

These priorities are:

  1. 'promoting confident participation in the financial system to support long term economic recovery
  2. deterring poor behaviour and misconduct through our ‘Why not litigate?’ discipline and driving cultural change using all of our regulatory tools;
  3. improving entities’ management of key risks to prevent and mitigate harms to consumers and promote a healthy financial system and economic growth;
  4. addressing consumer harm as a result of elevated debt levels and hardship, with a particular focus on predatory lending;
  5. reducing poor product design and restricting mis-selling;
  6. reducing misconduct by company directors and professional service providers; and
  7. delivering as a conduct regulator for superannuation'. 

Enforcement

From an enforcement perspective, ASIC's priorities over the next four years include: 

  • the case studies/referrals arising from the Hayne Commission
  • 'matters that engage ASIC’s powers or provisions that carry new or higher penalties'
  • misconduct by individuals, particularly criminal conduct or governance failures, at a board or executive level
  • significant market misconduct
  • serious misconduct involving large market participants
  • phoenix activity
  • auditor misconduct
  • new/emerging types of misconduct (eg misconduct using new technologies)
  • misconduct that involves high risk of 'significant consumer harm' especially where it impacts vulnerable consumers
  • misconduct in the superannuation and insurance contexts:  ASIC intends to focus on: a) provision of inappropriate products to superannuation fund members that either provide little benefit or offer poor value for money; b)  inappropriate disclosures or practices concerning fees; and c) trustees failing to act in the best interests of members.

Page 26 of the report outlines a number of 'continuing' actions under this initiative that ASIC is prioritising over the period 2020/21.  

Superannuation 

ASIC identified three key priorities in the context of its work towards becoming the 'primary conduct regulator for superannuation'.  Namely: 1) 'provision of inappropriate products to superannuation fund members that either provide little benefit or offer poor value for money'; 2) 'inappropriate disclosures or practices concerning fees'; and 3) 'trustees failing to act in the best interests of members'.  

[Sources: ASIC media release 31/08/2020; ASIC Strategic Plan 2020-2024

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https://www.minterellison.com/articles/overview-asic-corporate-strategy-for-2020-24

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