ASIC enforcement update

On 22 September 2020 the Australian Securities and Investment Commission (ASIC) released its bi-annual enforcement report for the January to June 2020 period.¹ In this article we will summarise the key takeaways from the report, and consider what this means for individuals and organisations heading into the latter half of 2020.

2020-21 enforcement priorities

To further its priority concern areas and strategic priorities as outlined in its Interim Corporate Plan 2020-21, ASIC enforcement teams are currently prioritising the following areas:

• Royal Commission referrals and case studies;
• Misconduct related to superannuation and insurance;
• Cases that engage ASIC’s new powers or provisions that now carry penalties or higher penalties;
• Illegal phoenix activity;
• Auditor misconduct; and
• New types of misconduct – e.g. carried out online or using emerging technology.²

The figures

The complete statistics and figures are available on page 6 of the update, however between 1 January and 30 June 2020:

• 54 people were either restricted or removed from providing financial services;
• The courts imposed $12 million in civil penalties;
• 233 criminal charges were laid;   
• 20 people were either disqualified from acting as directors or removed as directors;
• 99 investigations were commenced; and
• 62 litigation actions and investigations were completed.

COVID-19

With the disruption, economic downturn and market uncertainty that COVID-19 has caused, as Australia’s financial services regulator, ASIC has had to navigate the heightened risks to consumers, many of whom are in an increased state of financial vulnerability despite the safe harbour provisions.

In response to this, ASIC has created a set of COVID-19 enforcement priorities to mediate its response to COVID-19 related misconduct. These enforcement priorities are:

• Behaviour that attempts to exploit the pandemic. For example, misconduct such as poor claims handling, predatory lending practices, attempts to mis-sell insurance that is unsuitable;
• Opportunistic conduct. For example, scams, misleading and deceptive advertising;
• Failure to disclose materially negative information; and  
• ASX Market announcements that are either opportunistic or misleading;
• ‘Egregious’ governance failures, particularly in superannuation funds, schemes or corporations.³

Lavan comment

As we have discussed in our previous updates [see here and here], ASIC has extensive investigative powers.⁴ ASIC may commence an investigation in a number of situations, including where it suspects there has been a contravention of the Corporations Act 2001 (Cth) (Corporations Act).⁵

It is a timely reminder that:

• In carrying out their role, Directors should remain aware of their duties, both outlined in the Corporations Act and in equity; and
• Directors need to be able to assess and act upon requests to access company information.

If you have any questions in relation to this article please do not hesitate to contact Lavan’s experienced Corporates Disputes team.