ASIC's new Corporate Plan: "Why not litigate" takes a backseat in the name of economic recovery

By Ross McInnes, Josh Krechman, Rhys Williams and Mitchell Donohue
02 Sep 2021

Despite the retreat from "why not litigate", ASIC still has an important role to play in regulating corporate Australia and will deploy its regulatory armoury when the circumstances demand.

The Australian Securities and Investments Commission's (ASIC) Corporate Plan for 2021-25 indicates a clear shift in ASIC's strategic priorities with the regulator dropping its "why not litigate" mantra to better align with the Government's focus on economic recovery.

The Corporate Plan provides a business friendly road-map of ASIC's focus for the next 4 years under the new Chair Joseph Longo and is consistent with ASIC's Statement of Intent (SoI) published in response to the Australian Government's Statement of Expectations (SoE).

Government's Statement of Expectations

On 26 August 2021, the Morrison Government released its SoE for ASIC which outlined its priorities and expectations for ASIC. In his media release Federal Treasurer Josh Frydenberg noted that:

"The Statement of Expectations makes clear that the Government expects ASIC to contribute to the Government’s economic goals, including supporting Australia’s economic recovery from the COVID-19 pandemic and work closely with Government and Treasury on the implementation of policy reforms and in its exercise of policy-related functions" [emphasis added].

The SoE states that, from an economic perspective, the Government expects ASIC to:

  • "promote the sound functioning of capital markets and the corporate sector for the benefit of businesses and households;
  • minimise the costs and burdens of regulatory requirements for regulated entities and consumers; and
  • administer the law in a way that promotes competition and innovation in the interests of all consumers, including through promoting a digital economy".

In respect of ASIC's enforcement powers, the 2021 SoE is remarkably different from the 2018 SoE. While the 2018 SoE noted that "a key role of ASIC is to reduce the likelihood that consumers will suffer losses as a result of misconduct … [by] using the range of regulatory tools at its disposal", the 2021 version pares this back and implores ASIC to "identify and reduce misconduct risk through well targeted and proportionate supervision, surveillance and enforcement activities" [emphasis added].

ASIC's Statement of Intent

In response to the SoE, ASIC released a SoI outlining ASIC's intentions in relation to the following focus areas:

  • support for economic goals and COVID pandemic recovery;
  • regulatory co-operation;
  • stakeholder engagement and guidance;
  • use of regulatory tools; and
  • governance.

Of particular interest is the way ASIC has adopted the Government's language by stating that it will use its "full suite of regulatory tools in targeted and proportionate way".

ASIC's Corporate Plan for 2021-25

Despite the regulator's (and Government's) focus on economic recovery ASIC has not dropped everything in pursuit of that goal, stating that it will continue to use its regulatory powers over the next four years to:

  • change behaviours to drive good consumer and investor outcomes;
  • act against misconduct to maintain trust and integrity in the financial system;
  • promote strong and innovative development of the financial system; and
  • help Australians to be in control of their financial lives.

The key takeaways for business include:

  • the Chair's comments that the regulator will seek to "engage actively and transparently with the industry" and "continue to work closely with industry to help transition toward the new standards being set";
  • the creation of a dedicated unit within ASIC to reduce the costs and burdens of regulatory requirements (which is reflective of the regulator's commitment to assist economic recovery);
  • ASIC's continued work to implement the law reforms that arose out of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry; and
  • increased co-operation with other regulators. For example, ASIC is earmarked to gain powers in conjunction with the Australian Prudential Regulation Authority (APRA) in the event that the Financial Accountability Regime becomes legislation (it is currently in the consultation phase).

Implications for corporate Australia

On the whole, the Corporate Plan reflects a retreat from ASIC's "tough cop" attitude that emerged after the regulator came under fire from Justice Hayne at the Financial Service Royal Commission. However, "well targeted and proportionate supervision, surveillance and enforcement activities" should not be taken to mean an absence of regulatory investigation and enforcement. ASIC still has an important role to play in regulating corporate Australia and will deploy its regulatory armoury when the circumstances demand.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.