Stephen Jones (source ASIC)

With another Senate review and consultation into ASIC’s enforcement responsibilities underway, the financial services minister will take a hands-off approach.

Senator Andrew Bragg announced a review into oversight of ASIC’s enforcement abilities last week, while ASIC released its report on breach reporting to the industry.

Bragg had taken issue with ASIC’s expanded power and lack of enforcement. The scope of the inquiry will cover whether external dispute resolution services (i.e. AFCA) and the Compensation Scheme of Last Resort (CSLR) distorts regulatory enforcement – an issue the senator flagged during CSLR legislative hearings.

Speaking at the ASIC conference on Thursday morning in Sydney, Jones requested the review but asked that it be done “effectively and efficiently” noting that he will reach across the aisle to discuss the enquiry with the opposition.

“I’m a big believer in an independent regulator; it should be independent from executive government,” Jones said.

“We set expectations… but the regulator is accountable through our laws to the parliament. Our regulator is pretty well overseen.”

He added there were already several oversight bodies and committees for the regulator and that he would like to make sure the impending review does not overlap.

“I 100 per cent support the need for parliament to scrutinise the operations of the regulator.”

Strategic choices

In an address to delegates at the conference, ASIC chair Joseph Longo said the regulator remained committed to being a “strong and active” litigator against misconduct.

“We need to be strategic – we make choices to direct our resources to ensure maximum public benefit,” Longo said.

Longo noted in the last financial year, the regulator had competed more than 1,000 surveillances and commenced over 100 investigations.

“We completed 61 civil litigation matters and secured over $229 million in civil penalties and commenced another 75 actions,” he said.

“ASIC also secured criminal convictions against 33 individuals and commenced another 50 criminal actions.”

Taking action

Longo’s address – his first as ASIC chair – stressed the value the regulator continued to have and how several of its new enforcement powers, gained since the Hayne Royal Commission, have benefitted consumers.

The chair namechecked breach reporting, design and distribution obligations, and product intervention powers as powers that help reduce harm to consumers.

“We do not shy away from seeking significant penalties and undertaking important litigation – one of the challenges for a regulator is to strike the right balance,” Longo said.

“Clearly, it’s necessary to take decisive action against those who cause harm to consumers and investors, but there is also a need to focus on deterrence, education, and prevention to reduce harm arising in the first place. We don’t take either of these responsibilities lightly.”

Longo added the bar is set high for the financial services sector,

“given the complexity and volatility we face, there is no room for complacency – complacency breeds failure.”

After a quiet introduction to the DDO regime, the regulator has since issued 10 stop orders and Longo said there is a range of targeted surveillance projects “on foot”.

“We’re focused on sectors where we see consumer harm from poor design or distribution practices,” he said.

Longo said there were too many issuers seeking to market high risk and niche products, including in the crypto space.

“We’re seeing issuers promoting high risk products as appropriate investments that will make up a significant portion of an individual consumer’s investment portfolio,” he said. “This will not be tolerated and action will be taken.”

‘Sharp focus’

Longo outlined the regulator’s priorities for 2023 including protecting consumers, responding to emerging issues, and maintaining market integrity.

“Enforcement has been, and always will be, at the heart of ASIC’s work,” Longo said.

“We are focused on conduct that targets vulnerable consumers including First Nations people, and serious misconduct that is damaging to market integrity.”

Longo said consumer protection must remain a “sharp focus”.

“Against an aging population, volatility, complexity, and uncertainty make it a challenging time for investors, whether through superannuation or otherwise.”

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