Key Takeouts
- ASIC's latest enforcement activity report for the second half of 2020 highlights the regulator's continued focus on pursuing and securing court-based outcomes
- The number of civil penalty proceedings recorded has increased significantly and a record $159.8 million in civil penalties was imposed by the courts
- The report includes a brief status update on the progress of ASIC's Hayne-Commission related enforcement work. ASIC reports that as at 31 December 2020 the courts had imposed a total of $77.65 million in penalties
Overview
The Australian Securities and Investments Commission (ASIC) has released its latest enforcement activity Report - ASIC Report 688 ASIC enforcement update July to December 2020 (REP 688) - outlining its key enforcement actions during H2 2020. The headline message is that the regulator's focus on securing enforcement outcomes (and in particular, securing court-based outcomes) as a means of deterring misconduct continued in the second half of 2020, despite the pandemic. For example during the reporting period:
- the courts imposed a total of $159.8 million in civil penalties (up from $12 million in H1 2020), including ASIC's two largest ever civil penalty outcomes.
- there was a 164% increase in civil penalty proceedings, a 27% increase in the number of briefs referred to the Commonwealth Director of Public Prosecutions, and a 36% increase in criminal proceedings (as compared with the 2018 and 2020 calendar years).
Financial Services
- In H2 2020, ASIC recorded 37 financial services-related enforcement results, 43% of which were civil enforcement outcomes. Of the 37 enforcement outcomes recorded 35% (13) concerned financial advice misconduct and 30% involved credit misconduct.
Looking more closely:
- ASIC reports that there were 16 civil enforcement outcomes recorded across a range of areas including: investment management misconduct (5); credit misconduct (3); financial advice misconduct (3); insurance misconduct (2); superannuation misconduct (2); and 'other financial services misconduct (1).
- There were twelve administrative enforcement outcomes recorded across a similarly wide range of areas including: financial advice misconduct (7); credit misconduct (3); investment management misconduct (1); and 'other credit misconduct' (1)
- There were 7 criminal enforcement outcomes recorded in the areas of: credit misconduct (3); financial advice misconduct (3); and superannuation misconduct (1)
- There were two court enforceable undertakings recorded, both relating to credit misconduct.
As at 1 January 2021, ASIC reports that 16 criminal and 61 civil actions across a wide range of areas were still before the courts, that he majority relating to credit or financial advice misconduct.
Markets
In H2 2020, ASIC recorded 12 market-related enforcement results:
- 4 criminal enforcement outcomes: 1 in the area of insider trading and 3 in the area of 'other market misconduct';
- 4 civil enforcement outcomes: 3 in the area of continuous disclosure and 1 in the area of 'other market misconduct'
- 4 administrative outcomes: 2 in the area of continuous disclosure; 1 in the area of emerging market misconduct and 1 in the area of 'other market misconduct'.
- There were no court enforceable undertakings recorded.
As at 1 January 2021, 10 criminal and 1 civil action across a range of areas were still before the courts.
Corporate Governance
- In H2 2020, ASIC recorded only one corporate governance related enforcement result, a civil enforcement action in the area of directors' duties and governance failures.
- As at 1 January 20201, a further 12 criminal and three civil actions (all in the area of directors' duties and governance failures) were still before the courts.
In contrast, in the previous reporting period (1 January and 30 June 2020), ASIC recorded 23 corporate governance–related results and reported that 17 criminal and 11 civil corporate governance–related matters were still before the courts as at 1 July 2020. See: ASIC Report 666 ASIC Enforcement Update January to June 2020 (our view our key takeaways from that report).
Small Business
- In H2 2020, ASIC recorded 129 small business–related results: 98 criminal actions and 31 administrative actions.
- As at 1 January 2021, ASIC had 149 small business–related criminal matters still before the courts
Status update: Hayne-related investigations
Of a total 45 Hayne-commission related investigations, as at 31 December 2020:
- 7 have resulted in court proceedings which are now completed. In total, the courts imposed $77.65 million in penalties in connection with these proceedings
- 11 have resulted in litigation that was still on foot
- 11 investigations are continuing
ASIC reports that the remaining 16 cases require no further action.
ASIC is in the process of developing new priorities for the 2021-22 financial year
ASIC states that it will continue to both 'continue to act against misconduct that threatens the integrity of Australia's financial system and markets' including taking action to address any exploitation/attempted exploitation of the pandemic environment or misconduct that hinders the COVID-19 recovery.
ASIC encourages entities/individuals to cooperate with ASIC investigations
From an engagement perspective, ASIC states that it will continue to 'encourage entities and individuals who are under investigation to cooperate with ASIC as fully and quickly as reasonably possible' to ensure that 'only factual and legal issues that are genuinely in dispute will become the subject of prospective proceedings'. ASIC comments that this may have benefits for the parties in the form of reductions in costs/delays.
ASIC Deputy Chair Karen Chester communicated a similar message in her recent address to the AFR Business Summit 2021: Regulation for recovery: when pilots become enduring practice (read our article titled, Summary key points from ASIC.
[Sources: ASIC Report 688 ASIC enforcement update July to December 2020 (REP 688); ASIC media release 16/04/2021]