Role of ASIC

What does ASIC do?

The Australian Securities and Investments Commission (ASIC) regulates many aspects of Australia’s corporate, market and financial sectors. The role of ASIC includes ensuring 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 exercises 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, such as white collar crime.

 

What is ASIC’s investigative role?

ASIC is empowered by the ASIC Act 2001 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 a 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?

Where misconduct is suspected, ASIC will assess 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 (CDPP) that particular charges be laid.

 

Current ASIC priorities

ASIC’s current priorities include enforcing auditor independence and audit quality requirements, protecting investors and consumers, and implementing regulatory reforms.

 

Auditor independence and audit quality

ASIC requires auditors to be independent from the entities they audit, and to uphold audit quality. The legally enforceable requirements for auditor independence and audit quality are contained in the Corporations Act 2001.

On 8 June 2021, the first criminal charges were laid in Australia for failure to comply with auditing standards.

 

Protecting investors

The COVID-19 pandemic led to an increase in investment activity, with people seeking ways to maximise their income. ASIC seeks to take enforcement action against companies who exploit investors and do not act in their best interests.

 

Protecting consumers

In 2021, ASIC commenced civil penalty proceedings against financial services companies including AMP and Westpac for alleged legal breaches. For example, AMP allegedly charged life insurance premiums and advice fees to more than 2,000 customers despite being notified of their death.

 

Reforms and new regulatory requirements

ASIC introduced a range of new laws in October 2021:

  • Breach reporting reforms: The reforms strengthen the existing obligation on Australian Financial Services (AFS) licensees to self-report certain breaches of the law to ASIC.
  • Product design and distribution obligations: Entities are now required to introduce and maintain effective product governance arrangements focused on consumer outcomes.
  • Unfair contract terms protections: Protections apply to insurance contracts that are entered into or renewed on or after 5 April 2021.

 

Key takeaways

ASIC exercises its powers to regulate a wide variety of financial entities, to protect the interests of consumers and investors. Formal investigations are often initiated upon potential breaches of the law, which seek to further achieve ASIC’s objectives of ensuring compliance with legal obligations.

 

 

Nyman Gibson Miralis provides expert advice and representation in all aspects of white collar crime and corporate criminal law, including laws concerning money laundering, fraud, tax offences and bribery.

Contact us if you require assistance.