On 29 April 2020, ASIC released its periodic Enforcement Update (Report 660) which summarises ASIC's enforcement activity undertaken during the second half of 2019. Notably, in the foreword to Report 660, Deputy Chair Daniel Crennan QC states that ASIC has recalibrated its regulatory priorities to focus on challenges created by COVID-19 and other highly significant or urgent matters. Although ASIC's enforcement work will continue, some of that work may be delayed or affected by the crisis. Otherwise, the report notes that ASIC has achieved the following in the period July to December 2019:
- developed its enforcement strategy and priorities for 2019 to 2021;
- increased its capacity to investigate market, corporate and financial sector misconduct;
- used its additional resources to take on more enforcement work and to do it faster;
- made significant progress in responding to matters related to the Royal Commission; and
- in respect of its enforcement priorities, achieved enforcement outcomes in relation to misconduct by individuals (ASIC's enforcement focus is on criminal conduct or governance failures at board or executive level), serious market misconduct, illegal phoenix activity and misconduct that is serious either by its nature or extent of harm, or that involves a large market participant or licensed entity.
Enforcement Strategy and Priorities for 2019-21
In accordance with ASIC's four-year Corporate Plan for 2019 to 2023, ASIC's stated enforcement strategy for 2019-2021 is to:
Summary of Enforcement Results
Report 660 provides a summary of ASIC's enforcement results achieved between 1 July 2019 and 31 December 2019. Notably, there has been $12.9 million of civil penalties imposed by the Court in enforcement proceedings brought by ASIC. Additionally, ASIC commenced 60 investigations during the period, as well as completing 40 others.
ASIC's enforcement activities carried out from July to December 2019 address four key segments of the market:
- Corporate Governance: Criminal, civil and administrative remedies in were obtained in actions brought against auditors, liquidators and company directors. ASIC has also commenced (and is progressing) 12 criminal matters and 16 civil matters before the courts in the Corporate Governance space as at 1 January 2020.
- Financial Services: During the period between July 2019 and December 2019, ASIC obtained criminal, civil and administrative remedies across this segment in relation to misconduct concerning credit, dishonest conduct (misleading statements) and misappropriation. As at 1 January 2020, ASIC had 14 criminal and 58 civil financial services matters before the courts.
- Markets: ASIC was able to obtain civil, criminal and administrative remedies across this segment of the market in relation to misconduct involving contraventions of the market integrity rules, market manipulation and continuous disclosure obligations, As at 1 January 2020, ASIC had 10 criminal and 12 civil market related matters before the courts and had obtained remedies for misconduct in relation to continuous disclosure obligations, market manipulation and contraventions of the market integrity rules.
- Small Business: In the period between July and December 2019, ASIC obtained a number of criminal and administrative enforcement remedies in relation to action taken against persons or companies or misconduct relating to registration and licensing obligations. ASIC had 162 small business related criminal matters before the Courts as at 1 January 2020.
We also note that unsurprisingly (following the Royal Commission), there have been no court enforceable undertakings and no community benefit payments made in this reporting period. In relation to the Royal Commission, we recently provided an update on ASIC's (and APRA's) progress on the implementation of the Royal Commission's recommendations addressed to it. Our update included a snapshot of regulatory focus areas in a post Royal Commission regulatory environment.