The Australian Securities and Investments Commission, commonly known as ASIC, regulates many aspects of Australia’s corporate, market and financial sectors. ASIC ensures that financial services, including credit unions, banks and finance brokers, meet legal standards, such as those within the National Consumer Credit Protection Act 2009. To regulate their compliance, ASIC exercise a range of facilitative, regulatory and enforcement powers so that consumer interests are protected. Many of these powers are utilised when ASIC investigates suspected breaches of the law.
What is ASIC’s investigative role?
ASIC is empowered by the ASIC Act to ‘take whatever action it can take, and is necessary, in order to enforce and give effect to the laws of the Commonwealth that confer functions and powers on it’. Therefore, ASIC will exercise its investigative powers to recover money in some circumstances and prevent potential unlawful conduct before it occurs. ASIC’s investigations fall within their role as a regulator, aiming to deter future misconduct, set the standards for the financial industry and increase consumer confidence.
When does ASIC decide to investigate?
ASIC possesses the discretion to investigate potential breaches of law committed by the financial entities within its oversight. These may be reported by members of the public, referrals from other regulators, statutory reports from auditors and through ASIC’s system of surveillance. ASIC may also receive assistance or requests for co-operation with international foreign regulators. However, before initiating a formal investigation, ASIC must first undertake a consideration of multiple factors.
If a matter falls within their regulatory responsibility, it will be assessed to determine whether a formal investigation should be held. This includes consideration of the harm suffered by consumers, potential benefits of pursuing the misconduct in contrast with the expense, level of misconduct available on the evidence and any alternative courses of action such as surveillance. ASIC may also consider whether deterrence on particular misconduct is necessary, looking to whether the misconduct was an isolated instance or continuing trend within the market. Any further potential concerns will also be weighed against the benefits of initiating a formal investigation.
What happens if ASIC finds misconduct?
In the situation where a level of suspected misconduct is found, ASIC will undertake an assessment of an appropriate remedy to further its principles. This includes a consideration of the level of misconduct found, the post-misconduct behaviour of the offender and the strength of any potential case against the offender. ASIC is also required to consider the impact that a remedy will have not only to that person or entity but to the public. This may also include consideration whether deterrence is necessary to other individuals and entities within ASIC’s oversight. There may also be mitigating factors that impact the decision.
Upon completion of the assessment, ASIC will then select a combination of remedies to achieve the objective of the investigation. ASIC may also recommend to the Commonwealth Department of Public Prosecutions that particular charges be laid.
What are some of ASIC’s priorities today – mortgage brokering?
In recent times, ASIC has recognised major concerns with the methods of remuneration received by workers within the mortgage broker system. ASIC released a report reviewing the current framework in March, 2017, making six proposals aimed at increasing home loan competitiveness for consumers.
In its investigation, ASIC recognised a standard commission model that incentivised brokers to suggest inflated loan numbers to their customers, arising a conflict of interest. To achieve their principles, ASIC recommended a deviation from the standard commission model and removal of bonus commission and soft dollar benefit systems. Furthermore, a public system of reporting consumer outcomes was recommended to encourage consumer competition and allow for further oversight.
Recently, ASIC has published a variety of public submissions received from interested parties within the home loan market. A Royal Commission has been established by the Commonwealth Government to further investigate the banking, superannuation and financial service industries.
ASIC exercises their powers to both regulate a wide variety of financial entities and protect the interests of consumers and investors. Formal investigations are often initiated upon potential breaches of the law, seeking to further achieve their objectives of ensuring compliance with legal obligations.
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