Australian corporate regulator acts decisively to disrupt misconduct

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ASIC’s recent Enforcement Update demonstrates that it is in a strong position to identify and disrupt misconduct across the Australian financial sector through aggressive enforcement action.
 

The Australian Securities and Investments Commission (ASIC) recently released its Enforcement Update for the period from July-December 2020. There were no signs of ASIC slowing down its enforcement activity, particularly its pursuit of court-based outcomes, despite the challenges of the pandemic.

Record civil penalties imposed by courts

ASIC’s enforcement report demonstrates that it has used its increased resourcing to pursue and secure court-based outcomes.

Graph showing  key enforcement outcoumes

The headline outcome for ASIC was the record civil penalties (AUD159.8 million) imposed by the courts. Furthermore, the significant increase in the number of criminal and civil penalty proceedings commenced in 2020 highlights ASIC’s dedication to the ‘why not litigate?’ approach, driving cultural change through public denunciation and punishment through the courts.

Upward trends in enforcement activity over past three years

Several upward trends in ASIC’s enforcement activity were identified over the three-year period from 2018 to 2020.

Asic enforcement outcomes over a three year period

These trends reflect ASIC’s increased capacity (through improved resourcing) to undertake a greater number of investigations and secure more severe punishments for corporate misconduct.

In the markets division, there were 12 enforcement actions taken for market misconduct in the July-December 2020 period, relating to breaches of continuous disclosure, insider trading and other matters. Four of these actions resulted in a criminal determination by the court.

Decreasing priorities for ASIC

The Enforcement Update also shows some downward trends in certain enforcement activity that had been developing over the past few years.

Diminished enforcement priorities

The declining trend in enforcement action against small businesses suggests that ASIC is placing greater focus on punishing misconduct by larger market participants.

The decrease in corporate governance enforcement action mirrors a similar downward trend in accounting and auditing enforcement action by the S.E.C. and P.C.A.O.B. in the United States. However, this week, ASIC has commenced the first Australian criminal prosecution against auditors for an alleged failure to comply with auditing standards, demonstrating its continued focus on accurate financial reporting that we noted in our February 2020 blog post, Financial reporting and auditors under the spotlight in Australia.

Edward is grateful for the assistance of Georgina Calvert in the preparation of this post.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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