Express investigations, fewer enforceable undertakings and so-called “pilot programs” are ways the securities regulator will attempt to channel its energy this year, ASIC’s deputy chair and commissioner Karen Chester (pictured) has outlined.
Two-years on from being heavily criticised during the Hayne royal commission for being too cosy with industry, Chester has described a new approach in which the regulator seeks agreement on facts and admissions on liability with entities before going public and plans to use new intervention powers.
“The express investigation coupled with our new powers and higher penalties means that we can get the traction more quickly and thus the need to even contemplate an EU [enforceable undertaking] is falling away,” Chester said during an industry conference in March.
It wasn’t long ago during his interim and final summations that Kenneth Hayne highlighted the need for ASIC to stop negotiating with the industry and start enforcing.
“Too often, entities have been treated in ways that would allow them to think that they, not ASIC, not the Parliament, not the courts, will decide when and how the law will be obeyed or the consequences of breach remedied,” Hayne noted in his interim report, referring to the relationships ASIC had with the county’s largest financial institutions.
“In some instances, the EI [express investigation] pilot led to agreement on facts and admissions on liability, which saved time and the expense of a contested trial,” Chester elaborated in the last week.
“If cooperation from the entity wanes, ASIC’s investigation forges on. But slowly and with greater cost. And the Chairs and CEOs also understand our new ‘one strike and you’re out’ policy,” she said.
Legislative reforms passed by Treasurer Josh Frydenberg expanded ASIC’s role in supervision and enforcement as well as increased the regulator’s funding last year. This year ASIC’s powers will be enhanced as new design and distribution obligation rules come into effect and combine with its new intervention powers.
Chester highlighted its actions against Mayfair 101 Group of companies as an example of a so called pilot program in which it analysed websites, advertising, and social media to identify funds that marketed themselves as safer, lower risk, or more liquid than they really were.
Chester said more of these kinds of campaigns were in the works and described further ASIC’s approach to the entities it is responsible for regulating.
“Going forward, ASIC will seek to maintain a regulatory spirit-level between incentives for good conduct and compliance; and targeted, swift action when we see misconduct and harm,” she said.
“For the firms we regulate, both big and small, it means that more often than not, we will work with you, not against you,” she said.
“We want to reward good performers with nudges, not grudges. We want to train ASIC’s radar on harmful misconduct, not on harm-free process breaches,” Chester said.
“We want to train ASIC’s radar on harmful misconduct, not on harm-free process breaches.” And not before time. But let’s not just “want”. Let’s actually do it. Commissioner, could you please inform AFSLs unequivocally, in writing, of this ground-breaking shift in focus, so that they can develop advice assurance processes that actually enable long-suffering professional advisers the scope to provide meaningful, cost-effective advice to consumers. (Never thought I’d say this – I’m almost convinced that someone at ASIC finally gets it.)